Weatherford International PLC (WFRD) 2006 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the Weatherford International 2006 first-quarter earnings conference call. My name is Latetia and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Bernard Duroc-Danner, Chief Executive Officer. Please proceed, sir.

Thank you, good morning. I will turn it to Lisa first, and then I will make my comments afterward.

Good morning. This morning, we reported diluted earnings per share from continuing operations of $[0.50] (technical difficulty), but before I discuss the quarterly results, I wanted to note that certain reclassifications have been made to prior periods. We have included the trailing four quarters for your reference. The primary change is to classify equity and earnings from Universal as other income.

The $0.57 was a 24% sequential improvement over the $0.46 we reported in the fourth quarter and a 97% improvement over the $0.29 per share from the previous year.

Our $0.11 earnings-per-share improvement over the fourth quarter can be summarized as follows -- sequential improvements in our Completion and Production and our Evaluation, Drilling and Intervention divisions contributed $0.02 from the Eastern Hemisphere, $0.065 from Canada, $0.03 improvement from the U.S., $0.005 improvement from Latin America. And, the above operating increases were offset by the following non-operating items -- lower Other income, lower interest expense and a higher tax rate resulted in a net decrease of $0.01.

On a companywide basis, revenues increased 75 million, or 5%, as compared to the prior quarter. North American revenues increased 12%, the U.S. revenues improved 7% and the Canadian revenues increased 20% from the fourth quarter. Eastern Hemisphere revenues declined 6% sequentially, an increase in our Drilling Division was offset by a seasonal decline for Completion and Production. The Production division typically has high fourth quarter product sales which drop off in the first quarter.

Latin American revenues increased 3% sequentially.

Operating income -- it increased 61.1 million in the first quarter. Companywide, incremental margins were 82%. The strong incrementals were driven by higher adsorption, product mix and pricing improvements.

Another metric we monitor is revenue per employee. It rose 1.8% in the first quarter in spite of the fact that we hired 1400 people, most of whom joined late in the quarter. Since most initially require training, they added little to revenue-generating activities in their first quarter.

Now I will discuss the results for each division. Evaluation, Drilling and Intervention services -- divisional revenues increased 9% as compared to the prior quarter. Revenue improvements by region were -- Canada 25%, Latin America 13%, Middle East 2%, United States 7%, Europe-West Africa 2% and a decline of 4% in Asia. There were disparate trends within the region. For instance, in the Eastern Hemisphere, strong growth in Algeria and [Saudi] were offset in part by lower sales in CIS and Nigeria. All product lines improved sequentially with fishing and re-entry and the well construction product lines topping the list. This division's operating profit margin was 28.1% in the first quarter, a 320 basis point improvement. Incremental operating income margins were 62%. Strong incrementals resulted from absorption, pricing and product mix.

Now turning to Completion and Production Systems. Completion and Production Systems revenues of 510 million were essentially flat with the prior quarter's record revenues. The U.S. and Canada's revenues showed very strong growth with increases of 11 million and 17 million, respectively. Eastern Hemisphere sales declined 32 million in the first quarter. Eastern Hemisphere product sales have declined in the first quarter of each of the past five years for this division, so it's nothing unusual. Historically, second quarter Eastern Hemisphere performance rebounds to exceed what we had in the prior fourth quarter, and we expect the same to be true this year.

On a product line basis, sequential topline improvement was realized in all product lines except for our screens. Both traditional and expandable sand screens were down sequentially. EBIT margins in this division improved 80 basis points sequentially and 350 basis points over the first quarter of 2005. This is reflective of the change in product mix as well as improved pricing, particularly in North America.

We continue to forecast incrementals to be in the 30 to 35% range for this division throughout 2006.

Now turning to Other operations -- as a reminder, our Other operations consist of our fledgling Pipeline Services Group and our Drilling Rig operations. The Other operations revenues increased 4 million. Operating income increased 13 million. The improvement in operating income is reflective of higher utilization and the absence of costs incurred in the fourth quarter related to the transition to U.S. GAAP. I discussed that at our last conference call.

Cash flow and balance sheet items -- this quarter's capital expenditures, net of [lost in hole], were approximately 185 million. We have revised our capital expenditure forecast for 2006 based on contractual wins that extend into 2007. We plan for capital expenditures to be approximately 750 to 800 million for the year.

Our net debt to capitalization is 21.1%. We believe a debt to capitalization of 25 to 30% provides us with a balance between managing our cost of capital and maintaining financial flexibility.

As a reminder, our Board of Directors approved a $1 billion stock buyback program last December. We executed approximately 2.2 million of share repurchases at an average price of $41.81 during the first quarter for an aggregate investment of 91.5 million.

Now looking forward. The second quarter of 2006 should continue to show strong operating results in all regions, with the exception being the seasonal decline in Canada. In the prior quarter conference call, I had stated that Canada's second quarter decline would be offset by strength in the Eastern Hemisphere. Canada exceeded our expectations in the first quarter, so a more severe decline is expected. That, is there is more to lose.

We do expect to gain $0.01 in the U.S. We expect to grow primarily in Eastern Hemisphere should contribute $0.04. The seasonal decline in Canada is anticipated to lower earnings $0.08 to $0.09 sequentially, and we also will have higher training and personnel retention costs that will lower earnings $0.01 to $0.02. Obviously that is not exact by definition, and some may be slightly better or worse. However, we estimate earnings for the second quarter to be in the range of $0.51 to $0.53 per diluted share.

The continued startup of Eastern Hemisphere projects, coupled with a seasonal recovery in Canada, will accelerate growth in the third and fourth quarters. For the full year of 2006, we are raising our estimate from a prior range of $2.15 to $2.20 to a new range of $2.40 to $2.50. Now I will turn the call back over to Bernard.

Thank you, and I will read my prepared comments. Q1 earnings of $0.51 -- $0.57 grew by $0.11 over Q4's $0.46, which is a 24% sequential improvement. It is the second quarter in a row at or around the same 24% level. Q4 2005 had almost exactly the same sequential earnings growth percentage.

A study of our quarterly earnings in '05 through Q1 of '06 will show that sequential growth rates for the past three quarters are signaling an earnings acceleration which is among the highest in our peer group. [Reported] (indiscernible) revenues grew sequentially by 75 million, or a little over 5% over Q4; EBIT grew sequentially by 61 million, or 25%, incrementals were strong, 82%; companywide, operating income margins increased 320 basis points over what was already a very strong Q4; and EBIT margins companywide [crossed] 20%.

Geographically, the quarterly trends were very much as expected, just stronger. The West was strong with share gains in a number of product lines. Specifically, the West had $102 million incremental revenues, or 10.4% growth Q4 on Q1, splits about 60/40 between Canada and the U.S. There was a small contribution from South America.

The West -- the Western Hemisphere will continue to outperform, the underlying rig count fueled by the same share gain factors. The East was flat in Drilling and down 32 million, and Production [grew a] very strong Q4, which as Lisa said, is the usual seasonal decline. It was made worse specifically in Russia and West Africa; weather in one case, political event in the other. We're looking at [delayed] shipments there, essentially.

East -- Eastern Hemisphere has strong growth plan for second half of '06 and the first half of '07 across both divisions. Productivity performance was strong across the board with operating statistics showing productivity improvements in all categories, as was evident in the EBIT margins. Fixed cost absorption was the single most powerful factor. Product mix had a positive impact on incremental (indiscernible) margins. The move towards more technology-intensive products and services was the primary measurable factor.

Lastly, pricing strengthened late in the quarter. Pricing strength is spreading through product lines and regional markets. They should further impact the second half of the year.

Contractual activity was very strong throughout the quarter. Commitments were negotiated and/or signed up for a number projects incremental, primarily in the Eastern Hemisphere. Those projects will start up in Q4 of '06 and/or Q1 of '07. The largest contractual commitments are [for Directional, Underbalanced, Wireline and Completion], although a number of them [pulled through broader] drilling and production product lines. We added a net 1400 employees in Q1 for a net 5.1% increase. The employee count at the end of the quarter was about 29,000 employees. The new hires are going through different levels of training and are assigned to specific ongoing or startup projects worldwide. CapEx was flat on Q4, which should not be a surprise. Q4 was already at the '06 average level. Equipment and full investments in CapEx were in support of specific client requirements. There is no significant speculative CapEx. Cash payback on incremental investments is about 30 [months] or little bit better.

We are beginning to plan for our '07 CapEx. All in all, the quarter was strong and in all respects, very gratifying.

I'm going to go straight to the geographic trends. Here's how we see our regional markets unfolding. First, it's important to note that not all markets are in full stride. Certain markets are in full development, while others are in various stages or ramping up, evolving their plans, determining directions or merely undecided.

Second, some of the more mature markets have life in them, depending on product line offering and market positioning. The North American market -- start off with them -- still have growth potential. The Rockies, Barnett Shale and Gulf of Mexico have driven the gains in U.S. to date. There is more U.S. growth to come out of [tight] gas, CBM and deepwater over the next 24 months.

Canada is a very much the same -- heavy oil and CBM play central roles in continued low but sustained growth. Given our market position in directional, wireline, multilaterals, drilling with casing, ESS, ESB and stimulation product lines, we feel both markets will secure double-digit growth for Weatherford through '07. Those product lines all have low shares. That is why I have identified them and best in class technology in either the U.S., Canada or both.

South America is still now ramping up spending significantly. The market is healthy, but sleepy, comparatively speaking. The explanation is most likely political in nature. It is worth noting that we are in election years in six South American countries, and the six that I'm thinking of are all players in oil and gas. South America will likely have a stronger prognosis starting in '07. It's not a certainty, it's a probability, with Mexico leading the way.

North Sea European markets want to break open, but although healthy, is still held back. So as the new route of operators get their development plans underway, which is late '06 and into '07, the market will be strong, but it won't be exceptional. We expect the North Sea market to be substantially stronger in '07 and '08, and there are two trends working for us in the North Sea.

The first is increased high-pressure/high-temperature applications which are playing right into the hands of our technology. Second, operators are attempting to further exploit fields from existing platforms, which implies a quantum increase for multilaterals, re-entry and rigless intervention all playing into our toolbox capabilities and strengths.

Eastern Hemisphere ex-North Sea is a coiled spring in general and more specifically for us. It is not a monochromatic play. Some markets are taking off with powerful volume increases. Examples would be Qatar, Saudi Arabia, Algeria, India, and later in the year, Angola. But contractual activity is intense. These markets will grow substantially and they will growth through '08 and even later, but they are well on their way.

There are other markets that are planning for growth that have not implemented much, at least yet, but they will. Examples would be Libya, Egypt, Abu Dhabi, Kuwait, Yemen and Oman. These examples are not meant to be complete; I mean, there are more countries to be named. Activity ramp up will accelerate in '07 in those countries and [run their group phase] well into '09.

Finally, there are markets that are behind in either their planning and/or their commitment that are showing signs of gearing up. As an additional note, there are powerful plays on and around gas which will cross Africa, Asia and Russia. Much of the plays in Asia-Pacific will be offshore, some of it deep water. These markets will most likely give commitments in '07 and well into '010.

Each national market move is a multi-year expansion process, and these moves are cumulative. It makes for a very powerful multi-year regional growth. As you know, the requirement to compete in the East are a combination of technology, toolbox depth, toolbox breadth, and finally, infrastructure. [LOCs] are encountering greater technical challenges than they have ever been used to in the past [by] traditional, simple wells rarely ran into the type of difficulties we see today, the [prominent] fluid losses, complex well taps, water, [asphalting], production concerns, [span] production, et cetera.

On a forward-looking basis, and this applies to all of Weatherford, the whole company, we reiterate the assessment we made in Q4 for 2006. One -- Weatherford would average 30 to 35% topline growth '05 on '06. This is of course adjusting for full-year ownership of Precision in '05. At this time, we see no reason why this would not extend into '07 at a similar rate. Much of this will be driven by the underlying market growth, of course, and modest share gains for our technology.

The U.S. and Canada will see continued growth in '06. This may be more Weatherford-specific than industrywide.

Eastern Hemisphere -- we expect the East to have the highest growth rate companywide, for that rate to increase throughout the year and even more so in '07. Weatherford's fastest-growing individual markets in '06 will be Saudi, Abu Dhabi, Oman, Algeria, India and Angola. There are a number of other national markets in the East that are about to accelerate their growth, but more likely to move in '07 and '08. A few pockets of growth in Latin America for '06, for example, Argentina. As I discussed early on, Latin America will likely experience stronger growth in '07. Recall again, the geographic prognosis detailed above applies to both EDI or Drilling and CPS or Production divisions.

(indiscernible) the product lines, with the integration first, the EDI of the Drilling division, with integration of Precision tool and technologies, the size and configuration of the division has changed. The division had total revenues of $917 million in Q1. The segments ranked by size are, going from the largest to the smallest -- Directional and Underbalance, which we refer to as Drilling Services, 245 million, or just about $1 billion annualized, up $15 million from Q4, or 6.6%. Well Construction -- that would [regroup] to the [Drilling] Services, [cementation], liner hangers, expandables, and inflatables -- $220 million, up 18.5 million from Q4, or up 9.2%; wireline, both [open-roll] wireline and case tool wirelines, 181 million, up 12, or 7.1%; drilling tools, which is both proprietary -- example, jaws and extended-reach friction and reducing tools, or non-proprietary, such as BOPs and tubulars -- $166 million, up 9 million from Q4, or 5.7%; and finally, re-entry fishing, 104 million, up 24.2 million, or 30% from Q4. And as is obvious from these numbers I read quickly, re-entry and fishing had the highest sequential growth rate, driven in large part by, one, the Gulf of Mexico returning to a more normal level of activity; but two, and that's bigger factor, really -- an exceptionally strong multilateral business worldwide.

Well Construction was a runner-up with strong growth spread evenly between [Tubular] Drilling Services, cementation and liner hanger systems. Directional and Underbalanced, the Drilling Services segment, will have the strongest growth rate for the division over the next few years, most likely. In fact, much of the East growth -- Eastern Hemisphere's growth -- will be led by either directional or underbalanced and/or wireline. We expect these service lines to further accelerate their growth in '07. The growth is fueled by low market shares outside of Canada and [you'll be able to see] Weatherford's infrastructure, particularly in the Eastern Hemisphere. This tells only part of the story. The breadth, depth and substance of the technology Precision added to Weatherford is a feedstock of untied topline and margin expansion for years to come. It also blends powerfully with Weatherford's historical investments in technology.

I'm not going to drown you with details, I will highlight a few recent performance milestones. Directional -- Directional product lines should have 30 new directional systems deployed on contract in the Middle East alone by year end, yet essentially none at the beginning of the year. So a similar thrust for Directional and Underbalance going on in the European, African and Russian markets. Market penetration of wireline there is directional. Within Directional, the RSS line is growing very fast. We had a 63% increase in RSS footage drilled Q4 on Q1. RSS footage and runs were almost nil in Q1 '05. The year-on-year comparisons are obviously not meaningful.

They RSS technology attributes of -- Weatherford's RSS technology attributes -- are in a class of their own as downhole performance has been outstanding. For example, our RSS technology stands out versus its peers of rate of angle buildup, which in terms of well geography is terribly important. Late in the quarter, we pushed the envelope further by achieving 11 degrees per 100 foot build rate on a North Sea well. That's a big deal.

Similarly, LWD technology, which sets records of high pressure and high temperature, drilled flawlessly a 297 degrees Fahrenheit well in the Gulf of Mexico. It's a little bit more than we did on the Chevron well that we publicized a few months ago. None of our peers could operate reliably at those temperatures.

Our multilateral technology is also growing at one of the Company's fastest growth rates with complex Level 3 and Level 4 geometries. So backlog exceeds any prior periods by an order of magnitude.

Finally, we've performed our first deviated drilling location job with a 75 degree target section. This successful third-generation technology is moving drilling with casing into directional applications and pushing its capability a quantum beyond the very limited single vertical section of the well. The work -- the well was done for Pemex in Mexico, as another reference.

Moving over to the CPS, or Production division, the division declined seasonally $8.3 million, or 1.6%. Decline was entirely screened, both expandables and traditional, which is historically part of our Completion Systems. The other product lines were up Q4 on Q1. Regional markets affected were essentially Russian and West Africa where deliveries were impeded for a variety of weather and political reasons.

Division segments ranked by size, using the same frame of reference as we just did for the Drilling division, Artificial Lift Systems the largest one, $284 million, covering all five forms of artificial lift and covering also all of the optimizing software that goes with it, $284 million, up 14 million from Q4, or up 5%. It's obviously the largest segment we have in the Company, really over a billion. Completion System, 145 million, down 26 -- that's for screen -- from Q4. Chemicals and Stimulation Services, 81 million, up 3 million from Q4, or 4%.

The seasonal drop in Completion's sand control product lines, or screens, will reverse itself with strong growth in the balance of the year. Our sand control product line is actually one of the fastest-growing year-on-year for both secular and technology resources. In fact, at quarter end, both ESS and traditional screens had the highest backlogs in their respective history.

The CPS Division is building on two interrelated paths -- technology specific for brownfield redevelopment which addresses reservoir drainage and recovery; and unconventional hydrocarbons exploitation, all/or in and around sand control, chemicals, ESP and stimulation in selected markets because they have low market shares in those respective markets.

Although this isn't a quarter to comment extensively on fiber optics, in Q1 we had a field test breakthrough -- well, actually more than one -- breakthroughs -- in the use of fiber optics for seismic applications as well as multi-phase measurement. Fiber optics overall had quantum commercial potential for the division and Weatherford as a whole. There will be more on thin the quarters to come.

From the outside, there appears to be two large drivers at Weatherford -- EDI or Drilling and CPS or production. If it ever was the case, it isn't anymore. Both divisions positions are in an increasing number of joint client assignments, operate out of an increasing number shared infrastructures and share a growing number of joint R&D projects. Much productivity gains are expected from this intra-divisional (indiscernible) or lateral thinking.

Quick words about the Other section. As a reminder, the rig operation sits in the Other category comingled for SEC reporting purposes with our Small Pipeline Services. Other represents in total about 7% of the Company from a topline standpoint and less than six in operating income. Pipeline is about 2 and rigs about 5 percentage. Quarter is more representative of rig operating performance than Q4 was, and that is sort of the level of performance you should expect from this point forward.

Two comments on Rig Operations. One, the Rig Operations is in the process of shifting its assets to the Eastern Hemisphere. By year end '06, about 80% of the fleet will be in the Eastern Hemisphere with the balance remaining in Latin America. Later in the year, we expect to contract broad spectrum projects which will include a combination of cross-divisional competencies tying the land rigs with drilling and production division product lines. These projects will typically combine Directional, Underbalance, Well Construction, [fitting] Tools, Wireline, Stimulation and COMPLETION. They will most likely start up in '07.

Incrementals -- well, EBIT incrementals were 82% Q1 on Q4. The high incrementals reflected a combination of product mix, operating performance and pricing. Incrementals for EDI were 61.5%, or a 320 basis point margin expansion over Q4 at the EBIT line and the CPS division showed higher operating income on lower revenues, making incremental computation not meaningful. Margins improved 80 basis points over Q4 at the EBIT line.

Well, product mix yielded a higher overall margin in both divisions. This was in part a function of normal quarter-on-quarter noise and in part reflected the continued shift in technology intensity of products and services at Weatherford.

Operating performance showed strong productivity gains. This is a combination of better absorption with increased volume and dividends from years of efforts improving our supply chain. After this difficult organizational challenge posed by an acquisition with the scale and complexity of Precision, we're beginning the operational harvest. Much of the meaning behind the gratifying comment used to describe the quarter has to do with operating performance and productivity gains. Pricing trends in both divisions proved stronger than originally anticipated late in the quarter. The trend is still too [impressionist] to be reliable.

On a forward basis, incrementals by division will vary from quarter to quarter will also change as the year progress, but they're likely to remain healthy. We do not reasonably anticipate keeping incrementals at a Q1 level of 82%. We would, though, suggest raising the companywide targeted incrementals to a range of 35 to 40% rather than historical 30 to 35.

In summary, we have as good a visibility on our business as perhaps we have ever had. Weatherford's probable volume increase in '06 and '07 are on the high end of our expectations. The market is obviously helping, but what sets Weatherford apart is the organic upside potential of so many young product lines with state-of-the-art technology and low, low market shares in otherwise fast-growing regions. In this respect, our younger product lines and nascent technology are getting traction sooner and easier than expected. Client projects on the whole exceed our capabilities and will have to be implemented in a staged manner. We're expanding our people, manufacturing and equipment capacity aggressively. One only needs to look at our CapEx and the net new hire at quarter end to calibrate the expansion underway. We are acting quickly, but we will remain methodical and disciplined. Growth in people and equipment is not speculative. Notwithstanding our expansion, the length to time needed to execute our client-to-client growth will be stretched in years and often by our clients' own design.

The corollary is that we expect strong growth in our market and topline to be sustained through '09 and probably longer subject to healthy underlying economic activity and elasticity of non-OECD demand to hydrocarbon pricing. This is an interrelated reflection of the scale of projects and the concurrent acceleration of our client's reservoir decline rates. We are in a secular growth stage and one in which Weatherford should particularly excel.

That concludes my prepared comments. I will now turn the call back to the operator for questions. Operator, if you could start the Q&A session, please.

(Operator Instructions). Bill Herbert, Simmons.

Hey, Lisa and Bernard, the bridge from 215 to 220 guided EPS of 240 to 250 -- walk us through that? In terms of what's driving that. Is it mostly pricing? You mentioned pricing was better-than-expected. Is it mostly activity, is it better-than-expected North America? What is the mix? Is it everything just better than what you thought?

It's everything. I will let Lisa give the details, but it's everything better than we expected. It is a mapping of contracts and an estimated start-up date above and beyond what we expected. It's as much in the east as anywhere else. And U.S. -- Canada is about -- we're keeping it where we expected. U.S. is also better. So say U.S. better, Eastern better, and it's activity-driven. I will leave it at that. I will let Lisa answer further.

No, that's fair. I think if you walk from this quarter, obviously we'll have the decline in the second quarter. But as I mentioned in my notes, the second half -- you have the recovery in Canada and a very strong outlook in the Eastern Hemisphere. (MULTIPLE SPEAKERS).

The U.S. will be a little bit better than we expected.

And with respect to Canada, Lisa, what percentage of your overall revenues in the quarter came from Canada?

The percent of Canadian revenues, it's about 25% of total.

For the first quarter?

Yes sir.

Okay, great. And then finally, Bernard, a question for you here. With respect to the -- you made a comment with respect to the growth in Underbalanced and Directional, and you anticipate putting to work 30 new directional systems in the Eastern Hemisphere. Talk to us about staffing, crews, engineering talent -- where are we getting those? And then of course, you talked about other incremental opportunities in Russia, Africa and elsewhere.

The comment was just to give an idea of what's going on. And it was only Directional Systems, although many of them are tied with Underbalance. But it was only Directional Systems because it was the most I think representative. That I could give you. It's only because it's in a region -- it was only the Middle East. It was not Eastern Hemisphere. it was only in the Middle East, it being zero in January 1 and anticipated to be 30 at the end of December. What's a system? The complete combination of directional tools -- guidance motors, logging, et cetera.

So -- but, that was the comment made. And of course, the 30 have contracts and the contract are signed and it's just a question of delivery. So that's just to make sure that you understand the comment.

With respect to the staffing, I mentioned in the comments that at the end of the quarter, we added the net number, which is the only one that's meaningful, 1400 people; 1400 people, which is about a 5% increase over Q4. I suspect when we talk again at Q2, we'll add just as many. And those people come from, have different backgrounds, different levels of education, different nationalities as we're hiring them all over the world. Some of those people that have been hired and are being trained have background on and around the business. They are further being trained and are earmarked to provide the staffing for those particular contracts. There's a long, long, long logistic pipeline and we're really working now on '07 really, on staffing and so on and so on, for '07. We're not really planning any further for '06. It's execution.

Last one, and I will move on here. You mentioned Latin America being sleepy, but you're up 13% quarter-on-quarter with respect to the Drilling and the Intervention Systems in Latin America, which is pretty impressive actually, relative to what the competition is doing. Where did that growth come from?

It's Underbalance, a large Underbalance in South America. There are also some big Wireline gains and some Directional gains, and they pull through very nicely. They pull through the rest of the product line very nicely. Argentina would probably be the one that stands out, but it has a smattering all over South America. Mexico would be an exception -- there's no growth in Mexico. But your comment, question is reasonable. It's a hard market to show growth in for the time being. It's healthy, but you don't get a lot of market support.

Right, thank you very much.

Jim Crandell, Lehman Brothers.

Your introduction of your Precision product line into the Eastern Hemisphere, on just the introduction itself and the execution of this business plan, how would you grade the Company from 1 to 10, in terms of execution?

I suspect I would be a little bit biased. I would have to give it a high grade for the time being. But perhaps I should temper the high grade by saying that much scouting work had been done by Precision ahead of time in the sense that there were many trials towards being a run on a trial basis. There was [seeding] that was done, and that's one.

Two, I think for the business development, even our peers and competitors would agree with that, I suspect. From a business development standpoint, in the Eastern Hemisphere, the Weatherford infrastructure, the people there, management, are truly excellent. So the combination I think very good business development people on the one hand in those local markets and the seeding that Precision did made life easier. Now you don't see it through P&L, it's only because, what, we've signed up commitment, we're signing up commitment well into '07 now. And then of course, you have to execute them. But looking at the commitments that were achieved, I would have to say they did well.

Would you say your market penetration success, such as you illustrated by having 30 directional systems run in the Middle East, is more a function of [tri-R] [as you like] the rest of our product line? Is it more the industry is running flat out, or the customers are now starting to believe that you offer the best directional rotary steerable product out there?

First, I think the market always helps. We should be grateful for it; it's much easier. Second, I don't think that our plans are so desperate for tools and equipment they will sign up just about anyone who shows up. The constraints of not only the infrastructure, but just the performance of the tool and technology, are -- it's a very tall order to overcome. And I would also say that our peers and competitors do not make life easy for anyone coming in, which is very fair. So I think it is a real achievement. I don't think we try to postulate that we have better technologies than our peers, except in a few instances. And I also would argue, it's not really necessary. I would say when you have essentially no market shares and you're strong in those countries from a relationship standpoint, getting a market share that's as much as you can handle in a fast-growing market -- there's a market in the East which is going to grow for the next three, four years at a different very high rate in different countries, it's actually -- if you can perform technically, it's not that difficult.

Bernard, using your example of winning 30 directional jobs in the Middle East, how many of these are you also offering underbalanced, and how many of these are rotary steerable jobs where you're offering the whole downhole package?

One-third are tied to underbalanced jobs, roughly, and RSS, the best of my recollection -- I could be wrong on this -- I think almost all have an -- I'm not -- I'd say two-thirds, because I just don't remember. It's a high number on the RSS, but I don't want to say things are incorrect. Plus, I get confused with all of the commitments in '07. The (indiscernible) [charge] gets a bit longer in my mind. But I would have to say, the majority of them have RSS with it.

I think you threw out a number of 750 to 800 million in CapEx for the full year, and I think your number last quarter was 650. Is that correct, and where is this incremental 150 million or so going?

That is correct. We moved it up based on what we're seeing in '07. It's really a change in the full year CapEx based on contractual commitments in '07. And if you're looking at the incremental piece, it is primarily Eastern Hemisphere.

And it's primarily directional, wireline, underbalanced, et cetera, and so forth and so on, and -- period.

Okay. I will stop there. Thank you.

Mike Urban, Deutsche Bank.

You talked about a measurable or a quantifiable mix factor in terms of technology adoption. Are you able to quantify that at all in terms of the breakdown between pricing, absorption, technology? And, is there a particular product line or technology where you're seeing that, or is it a region where you're seeing that, or it is kind of across the board.

On the pricing issue, it's across the board. And I'm sure we'll get other questions on pricing. With respect to whether -- what were the percentage that one could credit to mix versus absorptions versus pricing, I'll let Lisa answer that one. I have a view, but I'll let Lisa answer that one. It will be more studied.

You can contribute about a third of it coming from product mix. Obviously, the absorption has the most significant factor. It's just the higher revenues going through all of the facilities, so higher revenues on the fixed cost (MULTIPLE SPEAKERS) and manufacturing. When I say facilities, both service facilities as well as manufacturing.

And again, is there a particular -- getting back to the mix factor, is there a particular driver for that, or technology and/or region?

There's always noise from quarter to quarter, so we have to be careful not to --.

Just in terms of the trends that you're generally seeing.

Lisa is giving a list -- why don't you do it?

(MULTIPLE SPEAKERS) Wireline, Directional (indiscernible) -- the ones that you would expect, the high margins. And I think that we tried to lay that out with the growth within the different segments. But obviously, having the higher wireline and directional sales helped.

Okay. And last question is, in the past, you have given us a sense for your ability to leverage the infrastructure either in terms of ability to sustain growth rates or dollar volume of business you do without having to really increase that infrastructure. And it still sounds like that is the case, just given the CapEx, because it sounds like mostly tools and contracts (MULTIPLE SPEAKERS).

There is no real estate, there's no so significant real estate that I can remember. If there is, it's not significant.

No, there's no change to that. The original CapEx I took for the year had a very small amount allocated to manufacturing and real estate, and that is not changed.

So I guess the real question is, how long can you go or how far can you go, either in terms of continued growth rates as you see them, or a dollar number, before you would need to expand that real estate?

I think we're okay through 2007. So during 2007, we will need to look at expanding for '08.

Great, thank you.

Ole Slorer, Morgan Stanley.

Hello, thank you very much. Bernard, if we can look a little bit further as you gave guidance for this year, but 30, 35% topline growth in '07 versus '06, your thoughts on that? Could you give us a little bit more color? Is it just more penetration of the position again over the Weatherford infrastructure, or is it a combination of underbalanced and the new Precision division (MULTIPLE SPEAKERS)?

It is -- the assumption is continued penetration, but it's not only of Wireline and Directional, there's also a lot coming out of production, CPS. You have greater penetration on the ESP side, you have greater penetration on the sand control side, you have greater penetration on the fiber optic side, we have greater penetration on the Stimulation side and the Chemical side. There is some, and they're not aggressive. The assumption is I think from a competitive landscape.

It's the same theme -- if you have good technology and good infrastructure and the market is strong, you can have share gains without really being too disruptive for anyone, and there's a lot of that. So as we try to assess the roadmap into '07, it's not only a Directional, Wireline, and Underbalance, which in the end, there's more (indiscernible) than that, even within the Drilling division; it is also what I just mentioned on the Production side. That is the backbone of the assumption that we would -- it appears we might be able to grow in '07 at a similar rate as we're growing '06 to '05.

I think that's interesting given, historically that we've always thought of Weatherford as a very offshore related drilling-centric company; I mean, not really getting big growth in the offshore rig count until '08 and '09. So, based on that, do you think that your old classic drilling-centric -- I mean, it looks to me as if that's your growth rate in '07, and it's [no reason why there's a slowing in '08 or '09].

I'm certainly not (indiscernible) you know the history of Weatherford well, but not turning our back on the Offshore Drilling's sort of centric identity Weatherford, which was indeed on and around cementation and TRS -- Tubular Running Services, or well construction, if you will. The fact remains, we have become more land than we used to be; there's no doubt about it, because at a certain size, you become everything. There's no doubt about that. But I think the growth of production, although it depends what quarter you look at, from one quarter to the next, there's always one that looks so much better than the other and so forth and so on, and that's just the way things are. As we look at the growth pattern of both divisions, as I tried to say in my comments, it's not that one stands out as being so much more promising than the other; it's about the same. So I don't think it makes us more Production then Drilling or more Drilling than Production, it just means you have more than one [carburetor] working for you.

And on your comment of 35 to 40%, you are of course aware that if you play that 30, 35% sales growth in 2007 and [starting] at [250], we get some quite aggressive numbers?

Which you ought to discount, for inevitably, (indiscernible) problems occurring that I do not expect. The point was driven to me by Lisa earlier on.

I wonder if I could also just ask two quick questions on the domestic effort. The fishing revenue is just unbelievably strong. To what extent is that a function of having ramped up a North American rig count maybe (MULTIPLE SPEAKERS)?

Remember that segment. We cannot break down segments into the lowest common denominator, because first of all, it's too much detail (indiscernible) for competitive reasons. But there are two words in that segment -- it's called reentry and fishing. (MULTIPLE SPEAKERS) Reentry is -- multilaterals is extraordinarily strong. It's not something that I can refer to a product introduction or anything else. [I don't know]. It's just the way it is. The MLC systems we have had, we introduced three years ago, all the way up to level 5 did well, but nothing extravagant. And it is not U.S. -- it's worldwide, there's an extraordinary interest in multilaterals. Now some of it is tied to simple things -- CDM for example, herringbone wells and the like. Those all require MLT. Some of [it are] brownfields in traditional oil plays, some of them offshore. Big MLT expansion in the North Sea going on, for example. Big MLT application in Saudi Arabia and markets like that, so it's across the board. Some of the growth fishing-related is indeed tied to rig count and the fact that crews are not -- I mean, there's a productivity sort of -- or lack of productivity impact, which is the more the crews are inexperienced, the more fishing you will require for open-hole fishing, which is something that didn't exist a few years ago. So that's also true, but it's both.

Okay. Finally, Bernard, you didn't mention Pressure Pumping this time around. If my numbers are correct, you'll be up to 270,000 horsepower next month, and that was your first goal. You did about a $300 million run rate in the quarter; you should be able to roughly about 500 of the current installed base once you get the revenue following through. Where are you taking this division next?

It's not a division, it's a segment. I think there are some planned stage expansion underway in the U.S. which will continue until some of the early months of '07, and then what else we will do, I really can't say, Ole, for competitive reasons. Perhaps at a future quarter, I can be more specific.

Thank you very much, Bernard.

Alan Laws, Merrill Lynch.

You mentioned high-temperature/high-pressure wells in your comments. Are you seeing any real acceleration in this sector or additional secular trends here outside of the North Sea? And the two questions I have around that are -- what did your order book look like for your [held] tools and really what you think your market share in this area is?

Market share I really can't tell, Alan. It seems that just about any of our competitors will want to get active in that market on -- particularly on the basis that people will not walk away from projects, they will just give it their best try. However, we do relieve a number of our peers on wells where their tools just cannot sustain the temperatures and the pressures. So I am not sure how to give you market share response.

Is this a growing market? Yes, it seems that way. It is growing both in the offshore and deep water applications, it's growing also on and around some of the unconventional plays. I cannot give you metrics on it, because I don't know. I don't know.

In terms of utilization, Alan, we -- my goodness, we are using every piece of a tool that we have in those applications. So the question really is -- how quickly can we put more in the market? -- more than anything else. And there is a bit of a sort of logistic rationing between -- depending on what it is we want to achieve -- with a bit of a longer-term view in mind, meaning not grabbing the job immediately; but rather, seeding markets for future growth in '07 and '08, and so forth. (MULTIPLE SPEAKERS) we will take on a high-temperature/high-pressure assignment. On a priority basis, we feel it is an important seeding for a client or a particular part of the world.

So, when you are coming in, in relief so to speak, when someone else's tool fails, you're getting a big margin for this? How would you rank --?

Yes we are, we are. That's true, but -- it's (indiscernible) now. That's absolutely true. But I think for us, what is more important than the margin is who is the client, and what kind of assignment is it, and how much of an impact do we make assuming we perform (indiscernible) would we really have so far?

Are there any restrictions on you growing this particular tool segment versus the other tool segments because of materials or anything?

Well it's not materials, Alan, it's just the people logistics. I don't want to make too much of the people logistics issue because it is being worked on and it is being relieved and it's -- things are expanding nicely. It's just also that you want to take on things that you have the ability to understand from an engineering standpoint, et cetera. You don't want to just grab everything you can. It's not necessary, and there is a downside to doing that. So it's more a matter of disciplining yourself than anything else.

Overall, though, it's pretty clear that you're the leader in [this segment]?

Oh, yes. I think that is clear. Which is less clear -- and I tried to make some inference -- is that the RSS technology is very good and truly, it's one, just one determining characteristic, which is building angles steeper -- is a very, very important differentiation. Having said that, RSS is growing by leaps and bounds, the industry -- the segment itself, there's plenty of room for everyone to prosper. So it's not so much we'll do harm to the people, but it is truly, truly, truly a very high-performance product line, and it's complete, as you probably know, in size. So it's very exciting. And that one only sort of time hopefully will show how well it can do.

Well, my follow-up question is really -- or, another question I have is on the Pressure Pumping, how much you just made. What share of your North American growth is really -- you said you're going to grow probably above what competitors are -- how much of this is related to Pressure Pumping?

I would say that, it's not only Pressure Pumping, Alan. I know Pressure Pumping gets a fair -- used to get a fair amount of attention. But there's also other, sort of young product lines in the U.S. ESPs, [electro-submersile] pumps, and the Sand Control product line, which never really had much a representation in the U.S.; it was a product line that was developed overseas for us -- are two other examples of things that -- and Wireline, for example, which has had a very -- and Directional, there you are -- has had as low of a market share there as you would find in the [East]. Those product lines, service lines, all of them together sustain or support the notion that in a very mature market -- no doubt the U.S. is mature -- and in a very mature market, we will grow faster, materially faster, than the underlying market. It's normal. Now, on your Pressure Pumping question, how big of it is -- is it, as opposed to the others? I don't know if I have the metrics. I would say, I don't know, it's maybe one-fifth of the differential growth rate, would be sort of my guess -- one-fifth of the differential in growth rates for the U.S.; that is a sort of -- not a very -- just common sense. It's not only Pressure Pumping.

That's good. I will leave it at that. Thank you.

Geoff Kieburtz, Citigroup.

I would just like to go back a little bit to the original Precision acquisition. And my recollection was a lot of the opportunity that you saw there was to bring the Precision product line through your existing Weatherford infrastructure, specifically in the Eastern Hemisphere. But it seems like -- well, a couple of questions related to that.

One, it seems like you're getting as much share gain going on in the Western Hemisphere as you are Eastern Hemisphere, if I understand your comments this morning correctly. Is that right?

That's absolutely right, Geoff. And it's -- first, the direction given initially is also absolutely right. The difference between what you will do in the East and what you will do in the U.S. is -- actually, there's two differences.

The first one is time. In the U.S., it's immediate, much faster. In the East, it's longer. There's a lag.

Second is the scale. What you will accomplish in the U.S., it's very good. However, it doesn't have -- I mean, over a longer period of time, of course, it doesn't have the same scale. And incidentally, you can throw in Latin America too with the U.S. So there's less U.S. -- it's a little bit like you're moving north-south and you're moving basically west to east. Now, the move north-south is the fastest, it's the easiest. And yes, we had better reception than I had anticipated. The move east is the most powerful, but it is longest, it takes the longest time. That's all that's going on. And whether it's north-south, or towards the east, market acceptance has been a little better than I had anticipated.

Okay. And then on the Eastern Hemisphere side, I don't know if this is a question that can be answered, but it -- sort the idea that you have an infrastructure capacity to build your business in the Eastern Hemisphere sort of implies that there is like a capacity utilization. Are you -- it sounds like you still feel as if there is ample infrastructure capacity to build these businesses in the Eastern Hemisphere, at least through the end of '07. Is that correct?

Yes, and it's -- and you're completely right to sort of -- to suggest that. How can the metrics be so precise? And they're not. It's an overall assessment of -- where do we have space issues? And when you categorize the number of places we have space issues, then it still is a small number. And then you apply the volumes that are coming through and you can sense, there's some time -- like this time next year, there will be a far greater number of real estate issues that will have to be addressed for '08. The metrics are not -- it's not binary, obviously.

Does that also pertain to manufacturing capacity? I mean, can you tell us -- ?

Manufacturing is expanding continuously, but not in the same locations. For example, we have expansions going on right now in the Middle East and Asia, and it's continuous. So that one is more of a continuous process. The service facilities end up being a bit more batch than the manufacturing. The manufacturing is growing throughout '06, it will grow throughout '07, but continuously -- and not in the same facilities, for the most part.

When you talk about a 30% to 35% topline growth in '07, what percentage of that would you attribute to share gains?

The great -- I mean, more than half. We've paused for a minute because it's not so much that we have inked the 30 to 35 for '07. The word 'similar' was used I think in my comments. It means that it appears to be of the same order of magnitude. It hasn't been inked yet. However, if I go back in the metrics in my mind, Lisa's doing it at the same time, it is more than half.

And last question -- you described the pricing trends as Impressionist. Could you elaborate a little bit on that?

Obviously, [you] used that word which I wasn't keen on elaborating. They appear to be strong. They appear to be strong or stronger -- I mean, they're the strongest in the east (indiscernible) because this was not a particularly strong quarter for the east in Q1 -- we appear to be the strongest in the east. I would like to be given another quarter or so before I can really comment on pricing, please.

And should we conclude that you're seeing strong signs, you're just not sure of how sustainable they are?

That's a little bit better. I do not want to be too early. I know everyone wants to be early; I'd rather just be safe. I am seeing in -- it's not a random event. [There] are obviously trying to get as much pricing as we can across the board. So it's not just the -- some happy, random event. I am seeing responses to what we tried, and we tend to be aggressive. Some of the best responses are coming in the east. [They're in] contracts, contractual renegotiations, contractual commitments. Some of it in North America too, but I would say I would point to the Eastern Hemisphere primarily. And I would like to give it -- we're not sort of -- we're not sort of tied to every three months reporting. Maybe in a month, I will know more. I don't have to wait three or four months. So I think give it a bit more time to make sure that what I think I'm seeing is actually substantive. It is looking stronger than I had anticipated, no doubt.

Would you be willing to offer any kind of quantification?

I think we'll leave that until we have it baked in the numbers a little bit more so we're a little more confident in our response.

Arun Jayaram, Credit Suisse.

Bernard, you mentioned on the land rig side that you would have 80% of your assets deployed in the Eastern Hemisphere by year end. I was just wondering if you could talk about where your current capacity utilization is on the land rig side. I think you had mentioned, it's about 5% of your revenues, or about $80 million today.

Yes, a bit less than that. Yes, well, we have approximately 15 to 20% of the fleet which is moving. 15% is better than none, but at least it's 50 rigs, and they're moving from the west to east, or they are on their way to the market in the east. This will go on in the second quarter. We have half-a-dozen rigs in the Western Hemisphere that not sure that we will ultimately keep as part of the fleet. And the real objective here is the rigs that are being moved to the east be utilized as a tool, as a tool to help facilitate, plan and execute particular projects for particular clients in particular locations. It's very narrow. It's very narrow, it's very targeted. And either it's a good idea, or it's not. But I think we will be able to find out, it will take us probably between now and the middle of next year to find out how attractive or reasonable or effective of a model it is to combine that with Directional, Underbalanced, et cetera. It's not a universal thing anyway, it is very targeted.

But at this point, it seems like you've not quite yet benefited yet from the synergies from the under -- (MULTIPLE SPEAKERS).

Oh no, no, no, not at all. I think (MULTIPLE SPEAKERS) (indiscernible) if anything else -- no, it's not at all. And that's not a surprise, huh? It's an industrial play, it's just not -- I think the idea of having someone logistic benefits, which incidentally, one of our largest competitors is doing it rather well. One of our largest competitors has started many rigs, and the space sort of within divisions, so they're not very visible. But they're doing it very, very well, combining that with everything else for particular projects, and doing it because I think there is a real value in doing it that way. And to a degree, all we're trying to do is emulate the way they are approaching the business for particular clients in particular locations on particular assignments. So it's not a universal thing.

And I think we noted that probably four months ago, that our goal was to have -- start realizing, have a project where we're going to realize the synergies in place by the end of this year.

And I think we'll have one or two -- I mean, actually, more than one, but one or two (MULTIPLE SPEAKERS).

Okay. Bernard, Lisa, as you look forward to 2007, you gave 30 to 35% kind of growth expectations for next year. Can you talk about how much of -- what percentage of your work do you have contracted, or just talk a little bit more about the visibility you see there?

I think it would be an overstatement to say that we have commitments in hand to support that percentage growth rate already across the board. That would not be true. However, we have at this point enough client commitments either that are contracted for or [have got to be] contracted for, which will start in '07. To where, when you look at what we have or appear to have, look at what is likely to come through over the next three to six months, you add -- and the underlying market, we expect it to be continued growth. We don't try to be too aggressive on whatever assumptions for the underlying market growth we bake in our numbers. A.J., it appears reasonable that the rate -- the growth rate would be similar. I don't tie it down to a particular number, just similar to '05 on '06. I just feel that if you were in our shoes, you would probably come to the same conclusion based on what you know you have, what you're likely to have and what the environment sort of is reasonably going to be, assuming there's no capacity review, of course -- I mean, [economies] and what not.

And obviously, the best visibility would have us in the Eastern Hemisphere.

Oh, completely. The east is by far -- this is where the metrics come from. They're the ones that -- it's the east that determines sort of the other concentric rings around the east, which is the hard core of the delta.

Thanks a lot, terrific results.

Kurt Hallead, RBC Capital Markets.

The question I had is, Bernard, in your commentary, you mentioned something about the growth rate in North America maybe being more Weatherford specific. Can you expand on that a little bit?

Sure. What I meant by that is that I thought that we are roaring bulls on U.S. or Canada underlying growth rates being very strong. I think there is still some strength in those very mature markets over the next two years, but it's -- we're not that aggressive on that. It really has more to do with the fact that, if you look at the (indiscernible) product line we have, and I'm going to mention the usual suspects, is Wireline and Directional and expandable sand screens are -- and -- (indiscernible) submersible pumps and stimulation and things like that. And I also (indiscernible) because they're getting a lot of traction in the Gulf of Mexico. If you add all of these pieces together, what they have in common -- this is really a U.S discussion more than a Canadian one. What they have in common is that they tend to be state-of-the-art. In some cases, they tend to be in a class of their own, and in other cases, those tend to be state-of-the-art. And they have very low shares. Well, technology doesn't apply really in stimulation; but the other ones, it does. And therefore, it is not unreasonable, based on what we know and what client reception is, that you will progress at a faster rate for the (indiscernible) and service lines, and that tired, old market is still growing in the United States than you would normally. So therefore, when you add the growth rates of those product service lines in the U.S., you conclude that you're lucky to have a stronger growth rate in that market, period, as you add it with the underlying growth rates, and there you are. That's all it is. It doesn't go on forever, but you've got a few years like that. And it's really more U.S. than Canada.

Okay. And then if I may, just one quasi-housekeeping deal, your other segment put up the biggest margins obviously since the merger, which is only a few quarters old. But is the 16% operating margin number something that is sustainable in that business segment?

That's more normal. That's what we should expect. As I mentioned, the fourth quarter had unusual targets.

Yes, it's more normal. But -- yes, period, I won't add any more. On the rig side, it's more normal. Pipelines actually will tend to do a little bit better and -- but it's academic.

I will follow up with some other things off-line. Thanks.

Dan Pickering, Pickering Energy Partners.

Lisa, I was hoping you could just help us with the sand screen business. You said it's down seasonally. What's the driver of that seasonality? Is it customer behavior or geographic?

It's customer behavior. It occurs every year in the -- looking back, it's the fourth quarter sales are high, and then it drops off in the first quarter. I think they're probably finishing up their budgets. And then it picks back up in the second quarter.

Okay. And then when we look at the Pumping business, remind us again which sub segment the Pumping business is in within CPS?

Chemicals and Stimulation.

Okay, it is, alright. I just wanted to confirm that. Thank you. And finally, Bernard, when we look at North America, particularly gas-driven activity for the remainder of the year, if we are going to see any sort of gas-related slowdown, where would you expect to see it within your business first? What are the things you're watching for to keep an eye on that market?

Probably [still] on the drilling side. Yes, it's on the drilling side. I mean the only on the Directional side of the three affected is the -- that comes to mind are Completion, of course to a degree, and Stimulation, yes. But, (indiscernible) small so it will be on the drilling side. And (indiscernible). I will add a comment on the screen side to what Lisa said, it's absolutely correct. There was some particularly wicked problems this quarter. We had shipments basically that couldn't make it to market in addition to the -- whatever seasonality you have which is [residual] in both Russia for obvious reasons is -- and also West Africa also for obvious reasons. So these things do happen.

Okay.

It's [just amplified, amplified and seasonality], that's all. I'll say no more, because it's not worth it, but I wanted to not want to add that.

Okay, so that's stuff that should show back up in the second quarter that was delayed in the first?

Presumably.

Okay, thank you.

James Wicklund, Banc of America Securities.

Bernard, I assume that you lost money in Russia like everybody else because of weather. Can you tell us how Russia's going, how big that is and where you expect that to go over the next year?

Russia has always been had sort of -- (indiscernible) sort of low key at Weatherford. I think if we had done some acquisitions there and so forth, it would have had a higher profile. So I'm glad you asked the question. Russia is growing, yes. Firstly, the answer is yes on your assumption for Russia, you're absolutely right. Russia today still is a small market for us, certainly by comparison with everything else. In fact, today still Caspian, which was part of the same market only a few years ago, is still bigger than Russia, (indiscernible) my numbers are going to be wrong, Jim, but they're going to be close, companywide, you're looking at approximately $225 million [give and take] for both, but I think Caspian would be 125 and Russia would be 100. So it's not big. It's a good market, though and it is -- let's focus on the Russian. Forget the Caspian, now, this is on the Russian. The Russian is still predominantly a product delivery market, albeit you've got a small [humble], I think something on the order of about a third of that, so 100 million. So these are very small numbers that are on the service side and they're growing very nicely. And, yes, you have some -- you will have some significant wins on and around that market for the Directional side, which is something I would not have anticipated certainly six months ago. It would not have been one of my earlier focus. That's for Russia, and so your assertion is correct. And yes, it is a small market, however, it is growing very nicely organically and it is very profitable.

And you see growth for a long time once the weather clears up, right?

That is exactly right.

Okay, let me ask my second question and I will get off. Bernard, what are you spending your time doing right now?

It seems I spend a lot of time on procedure, but I will leave that particular issue aside. I spend as much time as I can doing two things -- one, visiting our own people in different corners of the world; second, visiting with [NOC] management, NOC as a client, which I really enjoy, I enjoy immensely. I don't spend as much time with IOCs or independents as I do with NOCs. This has been going on for, oh my goodness, two years.

Since that's where the oil is, that makes sense. Okay, guys, good quarter. Thank you much.

James Stone, UBS Securities.

I am going to follow up off-line, given the time.

Thank you.

Mark Urness, Calyon Securities.

Good morning, good quarter. I will also follow up off-line.

Well, you're kind. In which case, I think we'll probably -- should we take one last question, and then we'll close, because (indiscernible) we have run over the hour we normally should take. So, operator, one last question if there is one. Otherwise, we will close now.

Robin Shoemaker, Bear Stearns.

Thank you. Bernard, just one point of clarification. You indicated incrementals would be 35 to 40% companywide, or that was the expectation, and Completion production of 30 to 35. So I'm assuming here that the Drilling Intervention Services' incrementals you're anticipating to be above 40%.

Actually, yes, you're correct. Really, I did not mean to suggest that we would have less -- the reality is that both divisions should be in the 35, 40% range. I think that (indiscernible) beyond noise from quarter to quarter, that's a safe number incremental wise, (indiscernible) I think. I won't necessarily say one will be much lower than the other. It depends.

Okay, because Lisa had indicated that was more in Completion Production than that lower range. But in any case, okay, understood. Thanks very much.

Thank you, everyone.

I think, operator, we'll just close the call here, and there is no closing comments, other than thanking everyone for their time.

Thank you for your participation in today's conference. This concludes the presentation. You may all disconnect and have a good day.