NBR
#Sure, let me just maybe elaborate a little bit on the Lower 48.
In general, I will tell you we are still cautious about the Lower 48.
We expect sequential deterioration in our rig count and daily margins in the second quarter.
Still, given what's happened with OPEC, inventory levels, global production, we are not prepared to call the bottom to the rig count.
Our own rig count has been relatively stable over the past month or so, so we think that is a sign that the rate of decline may have peaked.
With respect to your specific comment, we have had discussions with several major operators about what plans can be made for a potential upturn of activity in the second half.
People want to know what the contingency plans are, we are talking to them about contingency plans, how fast things can be reactivated, et cetera.
So there are a number of operators have contacted us about that.
But I want to say, this does remind us, if you go back to the last summer, we had ---+ commented the same thing.
And actually we took those comments to the point where we actually start doing stuff.
That's why we got out in front of ourselves, a bit of a head fake there.
We are going to be a little more guarded here.
But those discussions have occurred with several operators.
Second half, third, fourth quarter, like middle of third quarter, fourth quarter, kind of discussions.
Obviously with the ramp-up on both sides, they have some ramping up to do.
We have some ramping up to do.
They want to know how fast and how many rigs, et cetera, would be possible.
That sort of thing.
Denny, do you have that information in front of you.
I should have it.
By the end of the year, I think we should have about ---+ exit the year with 15 rigs on term contract right now, basically.
It's kind of a stairstep ---+ pretty even stairstep down for the rest of the year.
The end of Q1 was 33, basically.
Yes, it's pretty good.
More day rate, I would say, from a rollover.
We talked earlier about Colombia.
As far as we know, Colombia is going to the back to a more normal [level], so there will be increase in Colombia.
And then there are several projects in the Middle East that are basically on deferred status right now that we could see coming back.
Kuwait, Saudi, maybe some other places.
There's plenty of projects, they just need to get reactivated.
And a similar comment in Algeria, I would think as well.
Something in the range of 5%.
We focus on the earlier maturities and picked up from those.
Obviously the pricing on those bonds has now come up quite materially and they are all trading around [99], even over [100].
We have stopped those purchases at this point.
There is no negotiations ongoing right now, nothing really substantial, there's nothing ongoing.
This was really an activity at the beginning of the year when the customers wanted to basically extend the discount that we gave in 2015.
That really was at the beginning of the year.
There's nothing really significant ongoing right now.
Including workover rigs which would be about half of that, that could be about right.
As <UNK> said in his remarks, he gave a number for the drilling rigs, declined drilling rigs, the balance would be workover rigs, which really don't contribute much.
So when I said 10 to 12 rigs were vulnerable, I didn't mean that those dropped on April 1 by any means.
Some of them may not drop at all.
But I was just saying, based on the clients and the type of contracts and what those clients are doing currently to reduce costs, that's where we see the exposure.
In the Middle East, as you know, the gas projects all require rigs that don't exist in the marketplace.
By definition they are kind of new rigs, so all 3,000 horsepower rigs with huge BOPs and at a price level of rigs that don't exist today.
Same thing's true in Kuwait.
In Colombia, as you know, we relocated X rigs down there, which are new state-of-the-art walking X rigs.
I think they were really happy with the performance on those rigs.
In fact, we've had some initial really good success with them.
I think, over time, there will be an interest in more of that kind of technology.
In the short-term, I don't see a big shift right now.
<UNK>, actually I can't.
What I can say is the following.
First of all, in terms of just looking at the Company from a macro point of view, right now, as far as I understand, they're probably number two in hydraulic horsepower, in the active market today.
They're number one actually in cased-hole wireline, which is amazing to me.
They are number two in workover and number one in fluid hauling.
The overall position of the Company is truly ---+ it's built well.
I have said publicly that I don't think putting any additional equity into the existing capital structure and the current capital structure doesn't suit the business.
In particular, for all the pressure pumpers out there, I think this period of time, it's really kind of destabilizing for these guys because it is forcing them to defer maintenance and everything, so when a ramp-up occurs, everyone's going to need a lot of capital for the ramp-up, et cetera.
I think whatever happens here with C&J, it needs to have a restructured balance sheet.
What role we can play in that is open and we will just take it as we see it.
Sure.
On the M800, which we recently announced, we are hoping to get one of those active in the marketplace during this quarter, at the end of the quarter, maybe.
And I think the rig is targeted, as part of the market of the X rig, it's not there.
In other words, one to four wells, fast moving, and it has more racking capacity, hydraulic horsepower and it will move in two days.
Compare it to any other rig out in the marketplace today, on all those metrics which are important to an operator, I think it will surpass any of them.
And it's our first step in a long line of creating a platform for integrated services on the rig for things that are logical for a drilling contractor to take responsibility for, like we've articulated our vision.
There's some things that service ---+ third-party services done on a rig, like rig instrumentation that are third-party services today from other companies in the marketplace.
That will be incorporated in the rig directional drilling.
We are looking not to just do directional drilling but to actually change the way it's done by building it into the rig and trying to downsize the numbers of bodies that you have on the rig, not just from downsizing bodies but from doing it better by automating the process itself.
So there's a bunch of these initiatives.
We're starting to show them to the operators and see if we can get some interest in it.
There are several other services around the rig that, again, third parties do that we're targeting as well.
So we have a full-scale effort now out to do this and this is there ---+ we think we can grow.
We will be measuring it by dollars per rig of extra services.
That's where we go.
Over time we'd like that to be meaningful ---+ a meaningful number.
The M800 rig, we just finished this one.
We have two more M800s in process, and the all-in cost is ---+ the all-in cost of the rig compared to the X rig is not really any more expensive.
Actually it's going to be a little less.
The cost of these ones in the pipeline are actually significantly less because we have a lot of components in the pipeline from previous new-build plans.
It will be not a big increase in our CapEx to complete them.
So we want to get a couple of them into the market and show customers the value proposition and build it and be prepared for the up cycle.
That's the strategy here.
That's what we're doing for the rest of the year.
And we have shifted a lot of our manufacturing of the rigs overseas to certain low-cost environments.
That has allowed us to keep the M800 at a cost that matches the PACE-X and even a little bit lower than that.
So that's the good news.
The other thing that <UNK> was mentioning was on the M800, we do have our new control system which automatically provides the instrumentation that <UNK> was talking about and integration with the bottom-hole assembly.
A lot of exciting things in that rig.
I think the customer interest has been about as high as I've seen it in any of our rig categories.
We are very excited about it.
This is Denny.
We are getting close to the one-hour limit.
Let's take one more question please.
I think it was more the timing issue, the effectiveness of the issue.
In the Colombia, just managing that process, we put a lot of effort into it.
I think the result we achieved was a good result.
But it just took a toll that was unexpected by the time we actually got it done.
Both were more timing issues than disappointment.
The only other miss, I would say, is the planning on some of those ---+ the 657 which was part and parcel ---+ that's inherent in the business we are in where these things just don't always line up perfectly.
Unfortunately, that didn't line up perfectly.
Again, we are really happy that we actually got a jackup signed to Saudi Aramco in January which compared ---+ you survey the other people out there, you know how hard it is to get that, which is a sign of their confidence in us that they were able to do that.
But, again, just navigating, fitting it into the well program the right way and coordinating with the shipyard, et cetera, I think we fell a little short of where I wanted to be.
Like you said, this is one of the first times in quite a while that that's happened.
So everyone knows we have to really focus and try to do better.
So the message is pretty clear here.
On that, I'd like to have a crystal ball for the second half.
I really can't get into the specifics because the visibility does remain limited.
It is, obviously, as you know, very dependent on price of oil and we're going to be really working aggressively to maintain our market position everywhere.
We think that things could maybe by the end of the third quarter, you'll start to see something improve.
Again, it's so macro dependent right now.
I think anybody would just be guessing.
Mike, with that, I'll have you close out the call.
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