SPN
#Yes, I think what we have said is we would expect to continue to see the deepwater rig count trickle down some.
And not necessarily from Q3 to Q4 specifically, but over the course of the next few quarters until we've got an oil price that causes deepwater operators to choose to be more active.
A big part of our Gulf of Mexico revenue reduction from Q2 to Q3 was in the subsea P&A where we concluded the project in the third quarter; and as we said, we have no subsea P&A revenue in the fourth quarter.
So I would expect that we see Gulf of Mexico revenue come down, not just because of rig count but because of the inactive period for subsea P&A, which will go back up in the first quarter.
That is customer commitments that we have the first half of 2017.
Yes, I think the question about the US land market kind of carrying any deterioration from the Gulf of Mexico Q3 to Q4 is a lot about pace in the Gulf of Mexico.
And if we see increased pace and urgency with our customers from a completion standpoint, then yes, I do think it could overcome it.
But whether we see that pace or not is a question.
Welcome.
Yes, I think either way it's the components are going to be called on.
Whether or not you are rebuilding a unit or placing new orders, there is going to be call on engines and power engine pumps for sure.
Part of what we have tried to do, <UNK>, is to get in line early on some of this stuff because I am biased to believe that at some point in 2017 we're likely to see some tightness on components.
In total around $1 million.
We have seen those prices in total come down a bit, but they are still within 10% or 15% of what we saw in 2014.
You are welcome.
Yes, that's a great question.
I think that overall what we see with these companies that will be emerging from bankruptcy is companies that have very little cash to put to work, and certainly from a cost structure standpoint they are going to be paying less interest.
But I don't know that outside of their interest payments there's a lot that's been done within those companies from a cost structure standpoint.
We see them being encumbered with cash problems even when they exit bankruptcy, and that in some way inhibits their ability to respond to an up market.
I don't see them as being any more irritants they have been historically,
Yes, it is a matter of moving assets to the places where you're most likely to be able to rent those assets.
There is not a lot that you can do from a fixed-cost standpoint in the rental business other than exit a market.
To this point we have not chosen to exit any markets in our rental business and I really don't foresee that we will, particularly the Gulf of Mexico.
You think about this and maybe we don't have a deepwater rig count in the Gulf of Mexico that anytime in the very near future goes back to where we were in 2014.
But as the rig count comes off bottom, the incremental margin associated with rentals is going to be very high because we have got very little fixed costs in order to put those assets to work.
I think the other thing is: That in an overall smaller market, we're not going to have very much in the way of capital required in those businesses.
They still have the opportunity to generate very high-margin and spin off a lot of free cash flow, which characteristically is what we have seen in those businesses.
That is exactly right.
And part of the reason for that, <UNK>, is that the increment margins that go along with that business as revenue goes up are very high because we don't have people associated with the product when it leaves our yard.
And for the most part, the maintenance on those assets was done when they were returned to the yard.
So to actually prep a string of pipe for a customer is a very low cost for us, making the incremental margins very high.
I don't know that we have thought about a specifically that way because part of what is going to drive this in our rental business is lateral link.
So, if you are drilling a lateral that is the on average 3000 feet longer than where it was in 2014, then how many fewer rigs would it take.
I don't know that we have necessarily done the math on that, <UNK>.
But clearly on a per rig basis, with longer laterals rental revenue increases on the downhole rentals because they have got more pipe in the ground and more bottom-hole assembly in the ground.
You're welcome.
Thanks to all of you for joining us.
We will talk to you next quarter.
