Expro Group Holdings NV (XPRO) 2015 Q1 法說會逐字稿

Welcome to the Q1 2015 Frank's International NV earnings conference call. My name is John, and I will be your operator for today's call.

(Operator Instructions)

Please note that the conference is being recorded. And I will now turn the call over to Thomas Dunavant. You may begin.

Good morning, everyone, and welcome to Frank's International's conference call to discuss first quarter 2015 earnings. I am Thomas Dunavant, Director of Investor Relations. Joining me on our call are Gary Luquette, President and Chief Executive Officer; John Walker, Executive Vice President of Operations; and Jeff Bird, Executive Vice President and CFO.

Before we begin commenting on first quarter results, there are a few legal items that we would like to cover. First, remarks and answers to questions by Company representatives on today's call may refer to or contain forward-looking statements. Such remarks or answers are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. And such statements speak only as of today's date or if different as of the date specified.

The Company assumes no responsibility to update any forward-looking statements as of any future date. The Company has included in its SEC filings cautionary language identifying important risk factors that could cause actual results to be materially different from those set forth in any forward-looking statements. A complete discussion of these risks is included in the Company's SEC filings which may be accessed on the SEC's website or on our website, at www.franksinternational.com. Also you may access both the first quarter earnings press release and a replay of this call on our website.

Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measures in the first quarter of 2015 earnings release which was issued by the Company today and is available on our website. I will new turn the call over to Gary for his comments.

Thank you, Thomas. I am very pleased with our first quarter results. Our revenue is in line with our expectations as we delivered $277 million in revenue, up 5% compared to the first quarter of 2014. As was expected, we continue to be impacted by lower commodity prices.

We have, however, been able to offset reductions in pricing and lower activity levels through market share expansion and upselling our technology. This was the strategy we discussed with you last quarter, and we have found some success with our customers who understand our value proposition that our services and technology will help to reduce the total cost of ownership for their wells. We know we're not always the lowest-priced service provider, but when you consider the cost of drilling campaigns, including the cost of drilling rigs and the life cycle of the well, any pricing premium is more than made up for through efficiencies in our service and improved well integrity.

As we are seeing throughout the industry, we have received pricing discount requests from our customers. We have finalized most discounts and continue to talk with a few other customers concerning their expected activity in 2015. In general, we see discounts between 5% and 10% with most discounts expiring at the end of 2015. As I previously mentioned, we are working to offset these discounts through upselling of technology while requesting longer-term volume commitments.

Although we do not believe we have reached a market bottom and an end to pricing pressures, we have observed fewer requests for discounts and are optimistic that we're approaching the bottom, and the worst is behind us. Our offshore market has been resilient, and it appears that it will be stable in 2015. We believe this activity level is due to committed development work as well as exploration and appraisal work driven by lease contract terms.

When you think about current activity, especially in the deepwater, some costs and long project lead times make much of this work easy to justify, even in a down market. Although much of the offshore work is driven by lease terms, some work is discretionary and can be deferred within the framework of leases. This includes appraisal wells near existing fields and infield drilling in current producing fields. Overall, we believe this trend of relatively flat activity levels will continue until there is a recovery in commodity prices.

We have built a very strong presence in the deepwater market, particularly in the Gulf of Mexico and West Africa. Although our offshore segment is very important to us, we are not singularly focused on it. Frank's has a diversified portfolio both from a geographic and a geological perspective.

We also have a presence in the US land market, with approximately 20% market share, making us a leader in this highly fragmented market. We believe the strength of the pending recovery will initially be in US land, and, therefore, we are looking to strengthen our market share during the downturn. We have seen our activity decline at rates less than the overall rig count decline.

In the first quarter, our US land revenue declined 25% sequentially. This is due both to pricing and reduced activity. During the same time period, the rig count declined over 40%. The strength of our current operations lies in the fact that we are positioned with customers who have the right assets in the sweet spots of these basins and shale plays. During the quarter, we announced our agreement to acquire Timco Services.

This deal closed at the beginning of April. Timco is a regional tubular running company with a strong presence in the Permian and Eagle Ford. These two areas account for approximately 40% of the rigs in the US. The edition of Timco's management team, employees, assets, and customers is a further example of us positioning ourselves for the pending recovery.

We believe this is a good time to make an acquisition due to depressed asset values. This is a highly fragmented market that is experiencing contraction, and we're looking to position ourselves well for the recovery. We will continue to look for acquisitions that allow us to achieve our strategic growth targets, whether onshore or offshore in the US or internationally.

With reduced activity and lower margins, we have initiated an internal review of our cost structure, looking for ways to align our costs with the current activity levels. We have found opportunities through vendor savings, improved management of our equipment and better processes. As a result of this internal review, we also determined that we could reduce the size of our workforce and still provide outstanding service to our customers.

At the end of March, we announced a planned reduction of 400 to 600 employees, or approximately 10% of our workforce. This reduction will be focused on areas where we have experienced the sharpest declines in activity. Jeff will discuss the details and dollar savings associated with this reduction as well as other cost-savings opportunities.

Understand that while we're reducing our cost base, we are also working to position the Company for the eventual recovery, and we'll use this period to improve execution and efficiencies in all of our products and services. This includes a commitment to grow the competency and the capability of our workforce.

Lastly, because of the strength of our balance sheet, we are in excellent position to be a contrarian investor. We view markets like the current one as an opportunity to use our strong balance sheet, outstanding service and relationships with our customers to strengthen the position of the Company. We will continue to look for opportunities to strengthen and grow our business both organically and inorganically. I will now turn the call over to John Walker and Jeff Bird for their comments before providing my closing comments.

Thank you, Gary. Although 2015 will be a difficult year for the industry, we believe we have the people, the customer, and the balance sheet to build a stronger company during the slowdown. We have a number of initiatives underway to offset the expected declines from both pricing discounts and activity reduction. In the first quarter, we had success in offsetting some of these negative revenue drivers. The next few quarters will be challenging, but we continue to have confidence in our strategy.

In general, as we move through 2015, we expect and are starting to see deferred drilling campaigns and canceled work scopes along with the full impact of the pricing discounts. This will result in flat to sequential declines in total Company revenue and EBITDA margins until commodity prices stabilize and then ultimately recover.

Our reputation continues to be that of an industry leader, and this was, again, highlighted in the first quarter from when we called out to a drill ship in the Gulf of Mexico. We were asked to assist on a rig that had been shut down due to the equipment failure of one of our competitors attempting to land over 16,000 feet of casing with an additional 7,000 feet of landing string. The total combined hoop load of the casing and landing string was over 2.2 million pounds. Our engineers and operating crews responded quickly providing a solution and then mobilized our 1,250-ton drill pipe landing string equipment.

Our crews departed less than 12 hours after the initial call, and our equipment arrived on the rig less than 48 hours after the call. 12 hours later, we had landed the casing. This is the 20th landing string that we have run that had a buoyed weight of over 1.7 million pounds and uniquely positions us as the go-to service provider for the most complex applications, regardless of the location or water depth.

During the first quarter, international activity did not experience the same impact as the US due to the commodity price environment. This was especially true in international offshore markets, which is over 80% of our international business. Activity remained strong, but new opportunities will not fully offset activity that is being deferred. As an example, activity in the first quarter was positively impacted by increased conductor installation work in Asia, as well as extended work scopes in Africa, which partially offset declines in other areas. We expect continued focus of upside as we move through 2015, combined with our upselling efforts to partially but not fully offset the revenue declines due to reduced activity and pricing discounts.

Activity in the Gulf of Mexico remains resilient for us despite the fact that the floating rig count has bounced around and is now below 40. We continue to maintain our existing contracts and look to gain new work as drilling rigs enter the region, which occurred in the first quarter with two new build rigs that began operations during March.

We're also seeing an increased demand for our large-capacity handling equipment as well as our landing string services. Both of these services utilize our proprietary equipment and generate greater revenues and margins per tool than standard equipment. This also differentiates us in the market both from a technological and value proposition perspective. We expect this trend to continue as offshore wells, particularly those wells in deepwater, are becoming deeper and more complex in nature.

As with international markets, we expect to partially but not fully offset activity and pricing declines with new business and upselling opportunities. In general, the US land market is very challenging right now. Beyond pricing discounts requested from customers and a significant drop in activity levels competition is stiff, driving pricing down further. This still continues to be an important market for us as we and others believe the US land market will be the first to rebound and will lead the recovery following this slowdown. We're doing what we can to ensure we are well-positioned for this recovery.

As Gary mentioned, we expanded our presence in the Eagle Ford and Permian basins with the acquisition of Timco Services. This acquisition not only brings us bases nearer the sweet spots of the areas but also blue chip customers, experienced crews and a seasoned management team. This acquisition helps us to rationalize our locations in these basins. In addition, we have either closed or plan to close bases throughout the US as part of our consolidation plan resulting in cost savings.

Our tubular sales segment continues to see high demand and is exploring opportunities to gain new share outside of two core markets of the Gulf of Mexico and West Africa. We are well-positioned to react to the spot market opportunities as well as package sales with complementing services to differentiate ourselves in this market.

In pursuit of cost reductions, we have identified opportunities within the segment to reduce the cost of pipe we purchase through initiating a competitive procurement process and establishing supply chain vendor management practices. Leveraging larger volume orders along with just-in-time procurement will drive our overall costs of supply down and sustain our margins.

Overall, we believe we have the right strategy in place to deal with this downturn in activity. We are well-positioned in our key markets and looking for opportunities to use our balance sheet to expand our footprint and portfolios where it makes financial and strategic sense. We continue to review our cost structure while ensuring we have the right skills and capabilities to participate in this eventual recovery.

With that, let me turn it over to Jeff Bird to review our financial results for the quarter.

Thank you, John. Reiterating what you have already heard, we are pleased with our first-quarter results. We will face significant external headwinds for the balance of 2015; however, we are taking appropriate actions that will position Frank's to exit the current commodity environment a stronger, leaner business.

We demonstrated this in Q1 as we announced a 400 to 600 person headcount reduction. This includes six base closures in our US land business. The balance of the actions will be communicated by May 30. We took a one-time charge in Q1 of $12 million. These actions will result in $30 million in annualized savings, of which $20 million will be recognized in 2015. Additionally, we have implemented a company-wide productivity program focused on streamlining processes and leveraging our global spend to drive further cost reductions. We'll discuss more of these details in the coming quarters.

Frank's continues to maintain its strong balance sheet with $498 million of cash prior to the Timco acquisition and essentially no debt. We are taking action to preserve cash through CapEx reduction of 13% of total CapEx and 40% reduction of equipment CapEx announced on our last earnings call. We'll expand on our balance sheet strength through focus, working capital efficiency projects and accounts receivable and inventory. We believe we can drive a sustained 30-day reduction in DSO over the next 18 months through focused efforts on billing cycle and invoicing accuracy. A 30 day reduction in DSO would yield $100 million of incremental free cash flow. While it's early in our process improvement journey, we have already begun to see reductions in our DSO.

Turning to inventory, we have implemented new sales operation plannings process that will optimize the inventory levels used to service our tubular sales segment. These changes will come slower, but we would expect the benefits of this new process to take hold in late 2015.

Turning to our results for the first quarter, income from continuing operations for the first quarter was $46 million with net income attributable to Frank's International NV of $34 million or $0.22 per share. Diluted net income, which includes $2.2 million in assumed additional tax impact of conversion of preferred shares was $44 million or $0.21 per diluted share. Excluding severance and other charges, our diluted EPS was $0.25. A full reconciliation of our EPS calculations is in our press release.

Revenue for the quarter was $277 million, a 13% decrease sequentially largely on normal seasonality with some impact due to US on-shore rig declines and pricing pressures. Revenue experienced a 5% increase year-over-year. Our adjusted EBITDA for the first quarter was $100 million or 36% of revenue. We have added back one-time adjustments for our workforce rationalization. We expect further pressure on adjusted EBITDA margin in the second quarter as pricing reductions impact for full quarter results.

Diving deeper into our operating results, international services revenue from external sales in the first quarter declined 15% sequentially but grew 5% year-over-year to $124 million. Year-over-year revenue growth in Africa, the Middle East, Europe, and Latin America were offset by declines in Asia Pacific and Canada. Adjusted EBITDA for international services in the first quarter was $52 million or 42% of external sales.

US services first quarter revenue from external sales decreased 8% sequentially but increased 5% year-over-year to $109 million. Adjusted EBITDA for US services in the first quarter was up $45 million or 41% of external sales. Adjusted EBITDA margin was in line with previous quarters as the mix of business shifted more towards higher margin offshore work and the impact of pricing discounts increased as the quarter progressed.

Breaking our US services business into land and offshore, Gulf of Mexico first-quarter revenue was up 4% sequentially and 10% year-over-year at $74 million. Activity in the quarter remained stable and margins were strong as demand for our proprietary technology offset pricing discounts. US land decreased 25% sequentially and 3% year-over-year to $35 million. As you know, this region has experienced the sharpest decline due to the current slowdown. We were not immune as volume decline and pricing discounts impacted revenue and margins.

Lastly, tubular sales revenue from external sales in the first quarter was $44 million. This was down 20% sequentially but up 4% year-over-year. Adjusted EBITDA for tubular sales in the first quarter was $3 million. We maintained our margins on external sales of tubulars by taking advantage of spot market opportunities.

However, it should be pointed out that our tubular sales segment serves as the manufacturing shared service for the Frank's enterprise. As a result, as internal CapEx demanded declined, we were left with excess labor and overhead costs. We are addressing this excess cost through the recently announced cost actions. We would expect these cost actions to be fully implemented in Q2. This will result in the partial recovery of segment margins in Q2 and full recovery in Q3 to 2014 levels.

Our first quarter CapEx spend was $43 million. As mentioned earlier, we plan on a 13% year-over-year CapEx reduction with a 40% equipment CapEx reduction. Our expectations for 2015 remain unchanged from last quarter with $150 million in total CapEx spend, including $70 million in equipment CapEx. We are reviewing all capital needs, looking to eliminate or defer projects to future years that we deem not critical, given changing customer needs in the current market environment.

Diluted share count is expected to be 209 million for 2015. As a result of the lower activity in the US in 2015, we now expect our 2015 effective tax rate to be approximately 20%, versus the previous expectation of 25%. As we have discussed previously, our diluted EPS calculation includes an assumed additional tax expense upon the conversion of our preferred stock. There is approximately 5% of additional income tax assumed for diluted net income for financial modeling purposes. This is due to our [up C] structure. Please feel free to reach out to us if you have any questions about modeling.

Lastly, it is expected that our board of directors will declare a dividend on May 20, 2015, of $0.15 per common share subject to applicable Dutch dividend withholding taxes for the record date of June 5 with a payment date of June 19. This is unchanged from the previous quarter. I will now turn the call back over to Gary for some final comments before we open up the call to Q&A.

Thank you, Jeff. Anyone that has followed this industry for any period of time knows that it is cyclical in nature. The supply and demand imbalance will eventually correct causing oil prices to recover and activity levels to rebound. What we don't know is when this will happen.

There are already signs that production will be coming down. On shore shale wells have rapid decline rates, and nearly 50% drop in rig count will clearly impact production in the short-term. Offshore, you're seeing less infill drilling and production projects pushed to the right. This will also impact production in future years.

Once E&P companies feel the impact of this decline in production along with the associated impact to commodity prices, we will see an increase in drilling activity. We are taking the necessary steps, including lowering our cost base, critically examining and improving our business, and positioning ourselves through acquisitions to ramp up with prices and further strengthen our position as the market leader in tubular running services sector.

Clearly, the strength of our balance sheet keeps all options open for us and enables us to move quickly for the right opportunity. We have only begun the process of improving our underlying performance, and we look forward to highlighting our progress with you in subsequent quarters. Thank you for your time. And we will now turn the call over to your questions.

Thank you.

(Operator Instructions)

Our first question is from Jim Wicklund from Credit Suisse.

Good morning, guys.

Good morning.

That was one of the more upbeat calls we've heard this earning season, and you beat numbers. I have to say congratulations. You guys talk about -- you're highlighting the changes you will have over the efficiencies over the next several quarters.

And you talk about, Gary, all the things that you need to do. How long before the Company and its operations get 75% of the way to where you think it should be? I guess that, because timeframe is always an issue between investors and how the industry actually operates. So all the fixes you're doing, and there is a mountain of them, how long before you're 75% of the way there?

Jim, I would say that we've -- obviously there is a greater sense of urgency in moving faster because of the commodity price environment we find ourselves in. It would be my hope and certainly our plan, to try to get 80% of the value embedded into actions that we take at the end of the year. Now not all of that will be reflected, obviously, in our results, but by the end of the year, I would say the first wave, which represents that 80% opportunity we ought to have defined, have processes mapped and implemented, and then hopefully we will see the benefits of that carry on into 2016.

Okay, that is very helpful. If I could, do you need to bring in more people from the outside to get where you need to be in a year or two? Or do you have the capability, the staff -- I know John and all the people there are fabulous, but do you have the overall depth to get there with the people you have, or should we expect to see more people like you and Jeff come into the Company?

I think it would be safe to assume that there will be more inbounds, newer faces to try to bring in, Jim, some of the competencies and experience from the public sector to help augment the great Company attributes and experiences and capabilities that this Company possesses as a private entity. You can expect a few more new faces to sprinkle into the organization over the coming months as we kind of augment what we have in place from a private company perspective.

Both of those are very helpful. Thank you very much. I won't ask you about what activity is going to do because none of us know. Thanks, guys. (laughter)

Our next question is from Ian Macpherson from Simmons.

Thank you. Gentlemen, that was an interesting anecdote about your callout job, last quarter in the Gulf of Mexico. I was wondering how unusual something like that is or if it's not necessarily that unusual. Just trying to put it in context with your strong revenue performance in the Gulf of Mexico and also, maybe just ask you what you think your market share is in that greater than 2 million pound string load segment of the market. That seems to be the part of the market that's going to be disproportionately growing within deepwater going forward and what you think your competitive differentiation is and your market share is in that top end of deepwater?

Good morning, Ian. To answer your question in regard to the callout in the Gulf of Mexico, again, that further demonstrates our nimble ability to react to unforecasted opportunities. It's not unique in nature. This has occurred in international in the same quarter. I just highlighted one in the Gulf of Mexico I thought would be interesting for all the folks on the line.

We demonstrated a similar activity in Norway where an unforecasted event occurred. Our ability to get the right assets to the customer in a very effective time enhances that reputation that we have. In respect to the market as it goes further -- deeper and more complex in nature, we continue to see that side of the business being more prolific in nature and since the Gulf of Mexico activity, we have had another request for a very similar landing string application, which we feel comfortable that we're going to secure that business.

In regard to market share, I don't specifically want to get into that. But I would say that we certainly have the majority of the market share in that technology.

Okay. Great. Thank you. And then a follow-up for you, Gary, if you don't mind. Congratulations on getting Timco done.

Your commentary on the cycle sounds constructive enough that I would surmise that you would like to get more M&A done sooner than later, given your war chest and given the outlook for eventual improvement. Frank's really hasn't done anything significant in terms of deepwater M&A since becoming public. I wonder at the end of this year, if you haven't done anything to augment deepwater, would you be a bit disappointed, or do you think that you will still have opportunities beyond this year to get what you want to get done on that front.

Obviously, whether the opportunity set carries over from 2015 to 2016 and even beyond, Ian, is going to be dependent on what prices do, what commodity prices do. I would say right now, even though we are open, as I mentioned in my opening remarks, to offshore, land, international, US, and we have the benefit of a nice war chest behind us, and the capability to tap into debt if needed in order to transact, one of the things about offshore that we have to keep in mind is we do have a very, very significant percentage of that market, especially as you get into the complex wells in the deeper markets.

And I'm just not sure how much more penetration we can have there in select markets where we already are enjoying a pretty significant amount of business before our customers are going to push back and artificially try to change those dynamics to keep competition up. We're going to continue to look, and this is a good part of our business. It's the most resilient part of our business. But, because of market share, I think our opportunities there might be somewhat constrained.

US land is where we think the value is going to be, the opportunities to acquire at -- there's some pretty good asset values. But we're going to keep our mind open and keep our hopper full with all types of opportunities.

Very good. Thank you, Gary.

Our next question is from Blake Hancock from Howard Weil.

Good morning, guys. Gary, when you guys are talking about the delays in projects internationally, first, can you help quantify the number of projects that you guys are on here that are being affected and the magnitude of the delays you're seeing? And are you seeing the customers actually look to re-tender the work, or have your pricing concessions been enough to keep that from happening?

It's hard to quantify because there's so many moving parts, Blake. There is new work that comes up. There is spot work that comes up. John Walker referred to a couple of the examples where our competitors failed to perform, and we were brought in to help on complex jobs or technically challenging jobs. So it's very hard to quantify the impact.

What we're seeing is on -- and I tried to characterize this in some of our opening comments, we are seeing projects slide to the right. These are projects typically that are pre-FID. The investment decisions haven't been made. Lease terms are favorable to allow some deferral without a loss of the lease or penalties associated with the lease terms. We are seeing those slide to the right. But at the same time, you have varying activity on projects that have reached FID and now are in appraisal, evaluation or in development where there is even in some cases, some acceleration because costs have come down in the drilling sector, which is allowing -- and availability of rigs and equipment has improved to the point where it's allowed some of these mega-projects that are multi-year in schedule to accelerate some.

So, it's really hard to put your finger on it. Net-net for us, what we are representing it's been very resilient for us. We haven't seen a lot of growth, but we have not seen any slide off either in activity because of this ins and outs canceling out.

That is great. Thank you. My followup, when you guys are talking about the upsell, is there really an upsell of technology, kind of generationally, you guys adding additional equipment to the project, or are you saying that you are selling into more technically demanding jobs where you can save the customer time and money due to your offering?

Blake, this is John Walker. To answer your question is twofold just as you separated there. The first one is that upselling the technology when the contract is secured and there are other opportunities to embrace time efficiencies. That would be where we would offer an alternative technology to reduce time and ultimately the cost savings of total ownership to the client.

And the other point specifically related around the technology is when we would target complex applications and identify the technology and cost-saving drivers up front. It's just a wide in nature across the global platform. One thing I would like to also highlight, specifically related to this, is where we're seeing cost reductions, we're seeing opportunities for us as rig-sharing agreements actually come into place. And that ultimately is a good thing for ourselves as well as the industry, as it's creating more opportunities for us.

That's great. Thank you, guys.

(Operator Instructions)

Our next question is from Ole Slorer from Morgan Stanley.

Thank you very much, and I think you have a rather unique position that you are certainly the only company in my [corporate] universe that's showing an expanding EBITDA margin from the fourth quarter to the first quarter in North America. Congratulations for that. My question on that is how much of that was mix?

In other words, you have about a third of your revenue probably from onshore, which is low margin and that probably fell pretty fast in this quarter, relative to the resilience of offshore. Mix shift versus one-offs such as the big job, landing string job, that you did on a callout and probably got paid very, very handsomely for.

Sure, this is Jeff Bird. I think if you look at that segment specifically, there is some of that mix as we saw the US land business curtail and, obviously, the Gulf of Mexico business is a more profitable business for us and was much more resilient in the first quarter. I would say it's primarily mix in the first quarter.

And as we look into the second quarter, the land business -- the onshore business will continue to contract pretty rapidly if you look at the rig count while the offshore rig count continues to be stable. If you take that into consideration, the cost initiatives that you're taking into consideration and some headwind on pricing into consideration, should we expect the same trend of a rising margin into the second quarter in the US?

Yes, I think sequentially, you will see us down first quarter to second quarter primarily for a couple of reasons. One, we see the full impact of pricing declines taking hold in the second quarter. Those happened throughout the first quarter, but will largely take hold in the second quarter. You're right when you point out activity levels will continue to decline some.

And additionally, the cost actions that we took while they will benefit us fully in the third and fourth quarter, they will only partially benefit the second quarter. Those actions are being taken right now. We'll get about a half-quarter benefit from those in the second quarter and a full benefit in the third and fourth quarter.

Okay. Thank you very much for that clarification. I will hand it back.

Thank you.

(Operator Instructions)

We do have a question from Daniel Martins from FBR Capital Markets.

Good morning, this is Daniel calling on behalf of Tom Curran. I'm just looking for color, and I am sorry if I missed a prior discussion about it, on the press release, where you say that you believe that offshore activity will remain stable throughout the remainder of the year. Are you able to tell us a little bit more about it, what you're seeing and whether that is more macro or more Company specific?

Secondarily, at a more tactical level, I don't know if you're able to share with us how many incoming newbuilds and rolling over rig renewals you have. Thank you.

Thank you, Daniel. I will give you a cut at the first part of that question. I think the second part is in terms of how many newbuilds come in and how many go to work and how many replace existing units. We just don't have that insight presently.

I think the comment that we have made in the press release, and something we believe here internally is that the activity level, our percentage of the activity level is going to remain relatively constant through the course of the year. That is not a representation of the overall aggregate market. But we believe the ins and outs and the callout work that we had unplanned that replaces some work that maybe goes away because of economics, all of that is -- in our view is going to hopefully cancel each other out. And we'll see a relatively stable, that is our view, for Frank's share of the market and what the aggregate market does. I don't know how much more fungibility there is in the deepwater market.

I think a lot of the projects that could slide to the right, the operators have taken that action, and I think what we're -- what I am anticipating is they're going to running up against lease terms and obligations to the national oil companies and so you will either drill or drop in these leases. I am hopeful that in a more macro sense, we're seeing a leveling out now because I think things that could be deferred have been deferred. But in our press release, we're talking about our share of that market as being fairly resilient to date, and our view is that we'll be able to hold pretty good there.

Okay, that is very helpful. If you will allow me just a last question, can you talk a little bit about your views on M&A for the rest of the year? I know that you have a very good net cash position. What do you see the environment looking like, and what is your pipeline like? Thank you.

Well, so, I mentioned in my opening comments that we're trying to keep our hopper wide open, and we're looking across the board, not just US but international opportunities, land, offshore opportunities. So, the playing field is wide open. When you look at asset values relative to their peaks, obviously US land has given up the most. That would be an obvious statement. That seems to be the most fertile ground in terms of current asset values, but we're going to keep our eyes open; keep the hopper wide open and continue to look.

We believe that a highly fragmented US land market with dropping asset values clearly represents a primary target for us, but I don't want to have any of you draw any conclusion that that is the only game in town. We're going to continue to look and not just that -- the business that we are in today but also diversification opportunities.

Very good. Thank you for your time today. Appreciate it.

That was our final question. Thank you, ladies and gentlemen, for participating in today's call. You may disconnect at this time.