Nabors Industries Ltd.
Q2 2015 Earnings Call Transcript

Published: 5 Aug 2015

[Operator:]

Good morning, and welcome to the Nabors Industries' Second Quarter 2015 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Denny Smith. Please go ahead, sir.

[Dennis A. Smith:]

Good morning everyone and thank you for joining Nabors earnings teleconference. Today, we will follow our customary format with Chairman, President, and Chief Executive Officer, Tony Petrello; and William Restrepo, our Chief Financial Officer, providing our perspectives on the quarter's results, along with some insight into what we are seeing in our markets and how we expect Nabors to perform in these markets. In support of these remarks, we have posted some slides to our website, which you can access to follow along with the presentation if you desire. They are accessible in two ways. One, if you are participating by webcast, they are available as a download within the webcast. Alternatively, you can download the slides from within the Investor Relations section of nabors.com under the Events Calendar submenu, where you will find them listed in Supporting Materials under the conference call listing. Instructions for the replay are posted on the website. With us today, in addition to Tony, William and myself are Laura Doerre, our General Counsel; Siggi Meissner, our head of Global Drilling Operations, and Chris Papouras, our President of the newly-formed Nabors Drilling Solutions. Since much of our commentary today will concern our expectations of the future, they may constitute forward-looking statements within the meaning of the Securities and Exchange Act of 1933, and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, our actual results may differ materially from those indicated or implied by such forward-looking statements. Also during the call, we will discuss certain non-GAAP financial measures such as adjusted EBITDA and adjusted income. We have posted to the Investor Relations website a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures. Now I will turn the call over to Tony to begin.

[Anthony G. Petrello:]

Good morning everyone. Welcome to the call. We appreciate your participation as we review our results for the second quarter of 2015. As Denny mentioned, we have posted the accompanying presentation slides on our website. I will begin with a brief summary and then comment on our performance in the quarter. William will follow with a financial review of the second quarter. I will then wrap up to take some questions. For the second quarter, Nabors reported revenue of $862 million, adjusted EBITDA for the quarter was $288 million and income before taxes was $25 million. Fully diluted earnings per share from continuing operations was a loss of $0.14, which included income tax expense of $0.23 per share. The income tax rate in the second quarter is not representative of our estimated full-year effective rate. William will discuss the income taxes in his remarks. Moving to C&J

[William J. Restrepo:]

Thank you, Tony, and thanks everybody for joining us today. Net income from continuing operations for the second quarter was a loss of $41.9 million, or $0.14 per diluted share. The quarter included income tax expense of $66.4 million, or $0.23 per share. The majority of this tax expense was the result of a change to our full-year forecast that resulted in a $0.20 per share catch up for the prior quarter. Before further discussing the company's second quarter results, I would like to highlight three issues which impact distorts comparability of the operational trends of the company. During my discussion, I will attempt more material to explain or remove the impact of these items. They include the following

[Anthony G. Petrello:]

Thank you, William. I want to conclude my remarks this morning with a review of the four pillars that form the foundation of our operational strategy. We believe they are valid over the entire cycle and in a wide variety of markets. First, capitalize on the existing asset base. Nabors has a worldwide fleet of over 500 rigs. Our goal is to increase the returns on our existing assets and we will do that. Our prime example is our use of mass in substructures from idle, high horsepower rigs in the high specification units we have built for the Middle East. Second, differentiate our service offering. We are realizing early success as we add more services to our rig offering. In addition, we are developing new model rigs for applications where we see the opportunity. Third, improve operational excellence. I will give you two examples here. One, our safety record continues to progress. Thus far this year, we have improved on the record performance we set last year. Second, we continue to shorten our rig moving times between pads with our new X rig and we are replicating that across the fleet. Finally, enhance our financial flexibility. As mentioned earlier, we extended and upsized our revolver this quarter. This is just the latest in a series of steps we have taken over the past couple years. We will focus on additional opportunities to increase the company's cash generation and meaningfully impact our financial flexibility. That concludes our remarks this morning. Thank you for your time. With that, I will take your questions.

[Operator:]

We will now begin the question-and-answer session. And our first question comes from Marshall Adkins of Raymond James. Please go ahead.

[Marshall Adkins:]

Good morning, guys. Thanks for the thorough overview. I want to hear more about the Saudi situation. It seems like that's kind of a big deal. I mean it's been a really hot area and you're apparently increasing your stake there. Tell us what it means for you and kind of how that came about if you would.

[Anthony G. Petrello:]

Well, we're a long-term player there, as you know, for a long time, and the rules over the years have changed where local partners are no longer necessary for your operating in the country and it just came time that we wanted to gain greater control over our local operation and that was the motivation. We obviously see continued ramp-up in activity over there. It's no secret about their ambitions on gas rigs. As I've mentioned before, oil production, I think, internal consumption in the country is the big untold story with the amount of oil that they're consuming internally, which then drives the need for gas and their ambition on the gas rig – increasing rig count over the next couple of years, we think is real and, therefore, we wanted to position ourselves to take advantage of that.

[Marshall Adkins:]

Okay. So it sounds like a pretty good deal. Some quick follow-up kind of unrelated, we're modeling a pretty big reduction in SG&A largely due to the C&J thing and William gave some details on that, but it – you clearly had a greater reduction in SG&A than we thought. Did I hear you correct that excluding the C&J, we're kind of looking for an $80 million annualized type reduction in SG&A outside of or in addition to what the C&J transaction already given, did I hear that correctly?

[Anthony G. Petrello:]

You heard that correctly, and I think we're on target and we actually have ambitions to, hopefully, doing at least that well, if not better.

[William J. Restrepo:]

So, that versus the fourth quarter annualized rate.

[Anthony G. Petrello:]

Yeah. Versus the fourth quarter annualized rate, absolutely.

[Marshall Adkins:]

Right, right.

[William J. Restrepo:]

Yeah.

[Marshall Adkins:]

Got it. Thanks, guys.

[William J. Restrepo:]

Yeah. That's been high priority of ours, as you can see from the results of operation in the past two quarters.

[Marshall Adkins:]

Yeah. It certainly was an upside surprise for us. Thanks.

[Operator:]

Our next question comes from Byron Pope of Tudor, Pickering, Holt. Please go ahead.

[Byron K. Pope:]

Good morning guys. I wasn't writing quite fast enough, but Tony or William, I think I heard one of you say that Q3 rig margin per day as well as maybe in Q4 as well, flattish internationally; is that what I heard?

[Anthony G. Petrello:]

Maybe a little down in third quarter. And fourth quarter we think, once the deployments are fully operational, we should be back up.

[William J. Restrepo:]

There's supposed to be – we're going to be between contracts.

[Anthony G. Petrello:]

Yeah. Yeah.

[Byron K. Pope:]

And then in thinking about rig years, you mentioned, I think, about international rig years being down sequentially in Q3, but given your newbuilds coming on stream, it doesn't feel that's going to be a dramatic fall off as you think about the next couple of quarters, is that fair?

[Anthony G. Petrello:]

Yeah. Think of it that our expectations is hopefully balanced. Obviously, we can't project yet. We have so little visibility on what we've been seeing in terms of – or anticipating some of these drop off in the International current rig years, but we think that what's been in the pipeline, it provides pretty good offset to it. So it should be a soft landing no matter what happens.

[Byron K. Pope:]

Okay. And then last question for me, just on the U.S. Lower 48 in an environment where none of us has any good visibility on the back of the year, could you just frame for us how many of your rigs are on term contracts, maybe in the back of the year and then order of magnitude following on into 2016?

[Anthony G. Petrello:]

Basically about – in this quarter, so I would say of our current rig years for about two-thirds are on contracts and by the second quarter of next year it drops down to about 25%.

[Byron K. Pope:]

Great. Thanks guys. I appreciate it.

[Operator:]

Our next question comes from Robin Shoemaker of KeyBanc Capital Markets. Please go ahead.

[Robin E. Shoemaker:]

Thank you. So, Tony, I just wanted to get your sense of U.S. rig demand from your customers. Obviously, you mention it was looking a little better, we're up 24 from the lowest point. But we've heard some other companies suggesting that, with this recent drop in oil prices, we may not actually have seen the bottom on the U.S. rig count. So from your interactions with customers and what you're seeing on the horizon, do you think that we see a stable rig count at current levels or a slight decrease or increase for -

[Anthony G. Petrello:]

Yeah.

[Robin E. Shoemaker:]

... just through the end of the year?

[Anthony G. Petrello:]

Right. Obviously, this is grasping at straws here. If you go back and in mid-May, I think there had been some expectation, maybe I think starting to bounce a little bit by the end of the year. In fact, at that point, the oil price was about $57 a barrel; and we actually had some customers coming to us, telling us they had plans to have a steady rollout of some progression of increase in rigs. Our most recent conversation in the past week and updating for this conference call has been most of the operators talk about flat, and those people had actually told us about some plans to increase are now going back saying they need to reconfirm given oil prices. And some other customers are talking about taking a couple of rigs down. So that's kind of the latest feel for it. So I would say, we haven't heard yet a dramatic drop in rigs. I think some people are fine-tuning now in the light of the reduction in oil prices, and I think it's roughly a function of how long we'll stay in this $40 a barrel range. If so, I think there'll be some dropping. As I said, we haven't heard about wholesale change in plans, and most of the operators have basically told us they're looking at flat right now. But again, all these things, every operator we know of, whatever the plans are, they're all being revisited regularly. So that's the latest story.

[Robin E. Shoemaker:]

Right. Okay. So wanted to just ask about your initial reads on – you had a idea that C&J would perhaps have some greater international set of opportunities that might be helped along by Nabors. And of course you are doing pretty well internationally, especially in the Middle East. Is that process, not necessarily results probably not much yet, but is that process underway from the Nabors side of things?

[Anthony G. Petrello:]

Well, right now, I think C&J has been consumed with this market, first of all, getting this integration up and not losing a beat there and lowering their cost structures, but that is part of our plan and it's on our agenda to help support them. And as you've rightly pointed out, there's a few countries that we're in, where I think we can actually add value and we really believe Josh's management and asset base is ideal for some of these markets and we're committed to helping that happen, making that happen. So I would say so far, given where we are, it's probably a few months since the merger, there's been a lot more higher things to do.

[Dennis A. Smith:]

But beside that Tony, we actually have made progress on some of the core markets directly support this effort to get people established.

[Anthony G. Petrello:]

Yep.

[Robin E. Shoemaker:]

Okay.

[Anthony G. Petrello:]

In fact, Denny, I think we're actually supporting them getting registered for bids in certain countries for example -

[Dennis A. Smith:]

Right.

[Anthony G. Petrello:]

... things like that.

[Robin E. Shoemaker:]

Right. Good. Okay. Thank you.

[Anthony G. Petrello:]

Yep.

[Operator:]

Our next question comes from Scott Gruber of Citigroup. Please go ahead.

[Scott A. Gruber:]

Yes. Good morning.

[Anthony G. Petrello:]

Good morning.

[Scott A. Gruber:]

Given prevailing commodity prices, is it reasonable to assume that the rate relief you provided to customers abroad is likely to stick around next year, is that fair?

[Anthony G. Petrello:]

Sorry, can you repeat the question?

[Scott A. Gruber:]

The rate relief you provided customers abroad -

[Anthony G. Petrello:]

Yes.

[Scott A. Gruber:]

... for 2015 -

[Anthony G. Petrello:]

Yes.

[Scott A. Gruber:]

... if the forward curve prevails, which is about $60 – $55 on Brent, should we expect those relief rates to stick around in 2016?

[Anthony G. Petrello:]

I think we have to deal with that when the time comes. Right now, those were made given the current environment and – the international market, you have to bear in mind, it's not a perfectly substitutable market. The difference is in the U.S. today, there's a bunch of AC rigs stacked even amongst the top four guys. In the international market today there is virtually zero incremental utilization of rigs available, and that's a big difference. So in the Saudi market, if you want a deep gas rig, a new gas rig to do the deep, deep gas filling, it doesn't exist today. So that's a fact you have to take into account. That's why I don't think it's clear, the answer to your question right now.

[Scott A. Gruber:]

Got it. Have you entered into any agreements in the U.S. to provide rate relief when your peers had entered a few of those?

[Anthony G. Petrello:]

Well, we had some rollovers of contracts in the second quarter. We didn't have many really long-term contracts. I think maybe six months to a year on the extensions, and the extension rates were somewhere in the low 20s for AC rigs in the second quarter and around 20 on legacy rigs in the second quarter.

[Scott A. Gruber:]

And just in terms of the third and fourth quarter having a reduced demand outlook versus expectations three months ago, as you think about rigs rolling into the spot market, are you a believer that you can maintain that rate structure? Are you willing to sideline rigs versus putting them to work at lower rates?

[Anthony G. Petrello:]

Well, we're going to meet the market. Our strategy is to meet the market. We're not going to operate at cash flow negative margins or margins that just tear up our equipment. We're not going to do that. I think the rates I referred to in the second quarter are obviously down in the third quarter and fourth quarter. So we're going to meet the market.

[Scott A. Gruber:]

And that cash flow comment includes maintenance CapEx?

[Anthony G. Petrello:]

Yes.

[Scott A. Gruber:]

Got it. That's all from me. Thanks.

[Anthony G. Petrello:]

Yeah.

[Operator:]

And our next question comes from Jim Wicklund of Credit Suisse. Please go ahead.

[Anthony G. Petrello:]

Hey, Jim, how you doing? James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Good morning. Very good, very good. As kind of a follow on to the last question, you said that the contract rollovers were in the low 20s. My question was going to be what is the spot market? So should I assume that's the current spot market?

[Anthony G. Petrello:]

No. I just said that was in second quarter, the average in the second quarter. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Okay. Okay, okay.

[Anthony G. Petrello:]

I said now I think it's obviously, its somewhere at least 10% below that and obviously it varies widely. It's frankly very little – we're talking about very few data points here. Maybe - James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Exactly.

[Anthony G. Petrello:]

50 or 60 (9

[Anthony G. Petrello:]

Yeah. They're $11,000 plus a day. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Okay, okay. That's very helpful.

[Anthony G. Petrello:]

Sure. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) And Tony, you had said in your remarks "a focus on the more sustainable international market." Clearly, it's not as hyper cyclical as the U.S. market, and you've made some significant inroads into South America and the Middle East. Should we see that as a dedication to continue that effort? I mean, I know you're going to build one rig a year. Assumed that was going to be for the U.S. market, that may not be a correct assumption. Will you continue to aggressively grow your international presence over the next two years?

[Anthony G. Petrello:]

I think we will, and you see the benefit in our results from having a diversified asset base and portfolio. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Okay.

[Anthony G. Petrello:]

We think that's the right strategy and we think actually the market hasn't really understood the amount of cash generation we actually have for our international operation and the durability of it. So yeah, we're committed to that. When you look at the macro, in terms of the gas, prospects in these countries, I think there is also real pretty good opportunity for us. So that's the reason why we're so committed to it. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) And last one if I could. Everybody had talked a couple of months or maybe a quarter or two ago about Saudi Arabia saying if you want to keep work in force, you got to take a 20% price cut. It didn't hit land rigs as much, because they're not just a substitutable as some of the other services. And then you make the acquisition of your partner, have you seen or has the acquisition of your partners relationship protected you from pricing pressure in Saudi? And can you kind of give us a broad idea of what that pricing pressure looks like today?

[Anthony G. Petrello:]

First of all, the person that we took out was not a active partner, he was a passive partner an historical partner from actually the time of the Pool acquisition. So that's point one. Point two, I think there is a big difference between the rate deduction on land versus offshore for the reasons you said. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Good.

[Anthony G. Petrello:]

And we have had some rate deductions on land, but the order of magnitude, obviously, you can see in our numbers is nowhere near what we attack on offshore, so. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Okay. I figured as much. I just needed to hear you say it. Tony, thanks much, appreciate it.

[Anthony G. Petrello:]

Absolutely.

[Operator:]

Our next question comes from Brad Handler of Jefferies. Please go ahead.

[Bradley P. Handler:]

Thanks. Good morning, guys.

[Anthony G. Petrello:]

HI.

[Bradley P. Handler:]

Couple questions, maybe starting on the U.S. market also, but starting with clarification. I just – I'm not sure I heard your color around the U.S. land margin progression in the second half. I thought I heard it might fall $1,500 a day, but I just want to confirm that?

[Anthony G. Petrello:]

William, why don't you take that.

[William J. Restrepo:]

We said $1,500 per day. And basically, that's not really that the leading spot rates are falling. Well, that's not the only factor, but we're rolling into the new spot rate, a lot of our term contracts. So that will have an impact. We expect to continue working on our direct costs, but it won't be enough to mitigate the drop in the average day rate for the contracted rigs.

[Bradley P. Handler:]

Okay. And that was a third quarter comment specifically or does that take a couple quarter to roll into; what were you referring to?

[William J. Restrepo:]

I think we'll see it already in the third quarter.

[Bradley P. Handler:]

In the third, right. And presumably that pressure continues as more rolls onto the spot market through the middle of next year.

[William J. Restrepo:]

That'd be correct, yes.

[Bradley P. Handler:]

That's your implication, right. Besides from what you can do on the cost offsetting front, okay.

[William J. Restrepo:]

That is correct.

[Bradley P. Handler:]

I guess as a sort of related follow up. What are you – I understand the macro issues around clients pulling back on whatever incremental rigs they might have been thinking about. Is there a high-grading process that is at all relevant in your customer base, are you seeing some opportunities stem from, okay, I shed a certain – you know, I don't have to explain high grading. Are you seeing any of that in the interactions with your customers today?

[Anthony G. Petrello:]

Siggi, you want to comment?

[Siggi Meissner:]

Okay. I didn't understand the question, really.

[Anthony G. Petrello:]

Yeah. The high grading of opportunities. I think the way you see the market today, it does show high grading's in force. And as people's term contracts expire when an operator has a choice for a rig, I think all things being equal, if they can get in an AC rig verses a legacy rig, they're the high grade for the AC rig. And I think that the way the numbers look today, it supports that that high grading has been active. Our mission today, frankly, is to try to make money in an environment that's not growing. So we have to do a few things. We have to figure out how to operate more cost effectively. We have to figure out how to make sure we execute performance matters. And the third thing is we need to construct a value proposition around those AC rigs to differentiate ourselves against everybody else that has them. But, and one of thesis is that there is high grading of rigs.

[Bradley P. Handler:]

Sure. You made an interesting observation which I think we have also seen elsewhere which is that some of the incremental rigs have been at the lower end of the spectrum coming off of bottom.

[Anthony G. Petrello:]

Exactly. If you look at that bump in the rig count we mentioned, actually look at the participants, it's actually the checkbook drillers that were more quickly to just kind of rebound and that – the big boys don't necessarily participate equally in that segment, so.

[Bradley P. Handler:]

Right. So that dynamic presumably falls off and maybe the high grading becomes a little bit more prevalent in terms of at least incremental rig contract, so.

[Anthony G. Petrello:]

Exactly, exactly.

[Bradley P. Handler:]

Okay. All right. That's helpful. Thank you. I'll urn it back.

[Operator:]

Our next question comes from Mike Urban of Deutsche Bank. Please go ahead.

[Michael Urban:]

Thanks, good morning.

[Anthony G. Petrello:]

Good morning.

[Michael Urban:]

Just wanted to follow up on that high grading question. It makes perfect sense from an efficiency perspective, the comment they made as contracts roll off, all else equal, why wouldn't you take an AC. But the macro or the overall data hasn't really supported that yet and then your kind of anecdotal comments and then also just what we've seen off the bottom are suggesting that that hasn't happened. Is that just a function of time and normalization in the market or are we missing something where it just operators are maybe just looking to flat out cheap and not necessarily making what, in your mind, is the correct assessment value?

[Anthony G. Petrello:]

Yeah. I think that you just, with the latter point that you referred to, a lot of guys are just when they're in a cash flow crisis, they just look it cheap and that's what they're using to normalize. They're not looking at what the rig can actually do in terms of normalized productivity. And one of our missions is to try to make that value proposition clearer. But the other point I'd say is the legacy rigs, although, they are legacy rigs, they're not – they don't die immediately around here in this industry. I mean mechanical rigs have taken a long time to die and the SDR rigs, is – in our view, is still going to be around. And on a price basis, they're going to set new marks of loads that it's not so easy necessarily to displace them, at least not at rates that you're really going to be happy with. But on the other hand, I think the issue is for the high-grade rigs to demonstrate the value proposition to the customer and make it attractive to him to think about displacing. That's the challenge here.

[Michael Urban:]

Okay. Gotcha. Very helpful. My other questions were answered. Thank you.

[Operator:]

Our next question comes from John Daniel of Simmons. Please go ahead.

[John Matthew Daniel:]

Thank you. Hey, Tony, given your liquidity position today, where do you see the greatest opportunities for acquisitions?

[Anthony G. Petrello:]

Well, we obviously look at everything that's out there. I mean the problem of acquisitions is you'd have to reach a few hurdles for me. First of all, it has to at least be something that is as good as my internal growth opportunities. Secondly, if I'm looking at the rig business, the problem is the caliber and class of rigs I'm getting, there's not really many fleets out there that will improve the mix of my rig base. And so it's hard to see acquisitions that actually do that. And the third thing is an acquisition I want to meaningfully improve my market position would be customers, something like that. And most the markets we're in today and so you when you apply this litmus test, it has pretty high standard for an acquisition. Notwithstanding that, we're obviously looking for acquisitions all the time and we actually have a balance sheet now again that we think we're going to able to execute and do that, but this hurdle is high right now.

[John Matthew Daniel:]

Would you say that the majority of your time today is being spent on just dealing with the current market turmoil versus trying to look at growth opportunity?

[Anthony G. Petrello:]

No. I would say we have the best people doing everything right now. So we're looking at the growth opportunities. It's fair to say based on everything that's been on the market that you've heard about, we looked at

[John Matthew Daniel:]

Yeah.

[Anthony G. Petrello:]

And we continue to look at things, so.

[John Matthew Daniel:]

All right. Just one more from me, this may sound like a bit of a naïve question, but when I look at the Q2 international rig count, there are a number of countries where you're only operating one rig. And I presume those contracts must be good to have just one rig in country, but would those areas be the ones that might be most at risk down two to three quarters from now if competitive pricing pressures escalate?

[Anthony G. Petrello:]

Yeah. We don't like being in single string operations long term. So if we're there, it's, hopefully, because it's a beachhead for further growth or it's because the economics were so good it made up for the fact it was single string. But like I said, I think we want to concentrate in the areas where we can have real growth opportunities, and that's one of the missions today.

[John Matthew Daniel:]

Okay. Thank you.

[Anthony G. Petrello:]

Yep.

[Dennis A. Smith:]

Dan, this is Denny. We're getting close to the one hour mark, so why don't we just take one more question and wind up the call, please.

[Operator:]

Thank you. Our final question will come from Sean Meakim of JPMorgan. Please go ahead.

[Sean C. Meakim:]

Hey, good morning, guys.

[Anthony G. Petrello:]

Good morning.

[Sean C. Meakim:]

Just – maybe just a follow-up on some of the previous conversation but seeing that from a different end. For some of those customers maybe haven't participated in the high spec market before, are you seeing any of those folks looking to take advantage of lower dayrates or high spec rigs? Maybe the 1% seen previously, but now looking to kind of get in at a better price?

[Anthony G. Petrello:]

I think given the change in prices, I think people who hadn't thought about before, it's topical discussion now. I mean the tougher mines are open. So I think those kind of people are thinking about it, absolutely. But it's still a sales challenge for people who haven't made that switch yet.

[Sean C. Meakim:]

Okay. That's fair. And if we think about, if the base outlook perhaps is a flattish rig count kind of bouncing around for the next several quarters, we get into a substantial portion of 2016 and we're still in kind of roughly at the same levels, would you expect pricing pressure for even the upper end of the AC market to remain – for pricing pressure remain intact? Or do you think that at some point here, in a flash rig count, you can see some stabilization in the upper end of the market?

[Anthony G. Petrello:]

I think if things just bounce around at the same level, I think there will be continued pricing pressure.

[Sean C. Meakim:]

All right. Fair enough. Thank you, guys.

[Anthony G. Petrello:]

All right. Thank you.

[Operator:]

This concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

[Dennis A. Smith:]

Ladies and gentlemen, we want to thank you for participating today, and if you have further questions or anything as always feel free to reach out and call us or e-mail us. Thank you, again.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.