Good day, ladies and gentlemen, and welcome to the Halliburton First Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator instructions] And as a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Abu Zeya. Please go ahead.

Good morning and welcome to the Halliburton first quarter 2019 conference call. As a reminder, today's call is being webcast, and a replay will be available on Halliburton's website for seven days. Joining me today are Jeff Miller, Chairman, President and CEO; and Lance Loeffler, CFO. Some of our comments today may include forward-looking statements reflecting Halliburton's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2018, recent current reports on Form 8-K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures that exclude the impact of impairments and other charges. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter press release and can be found in the Investor Downloads section of our website. After our prepared remarks, we ask that you please limit yourself to one question and one related follow-up during the Q&A period in order to allow time for others who may be in the queue. Now, I'll turn the call over to Jeff.

Thank you, Abu, and good morning, everyone. What a difference 90 days make in this market. Commodity prices have rebounded, customer budgets are refreshed and we're back to work. Our results for the first quarter played out as we expected and I'm pleased with how our organization executed both in North America and internationally. Here are the first quarter highlights. Total company revenue of $5.7 billion was essentially flat compared to the first quarter of 2018 and adjusted operating income was $426 million. International revenue increased 11% year-over-year, which was a great first step towards our expectation of high single-digit international growth for all of 2019. Our Drilling and Evaluation division had a strong year-over-year revenue growth of 7% with activity improvements across all geographic regions. Finally, as expected, hydraulic fracturing activity ramped up in U.S land as customers refreshed their budgets. And despite pricing headwinds, our execution resulted in delivering better than expected margins in our Completion and Production division. From a macro perspective, 2019 is off to a strong start. Commodity prices have been rising since the beginning of the year due to tightening oil supplies and stable demand. OPEC plus production cuts and supply disruptions from Venezuela, Iran and Libya have supported market rebalancing. Oil demand trends, particularly in China and India, have also been constructive. Overall, the macro environment remains favorable for our industry. Against this backdrop and with winter behind us, customer activity in both hemispheres has picked up off December lows and continues to trend higher. Although we often discuss the hydraulic fracturing business in North America, it's important to remember that Halliburton has a portfolio of 14 product service lines operating in North America. For example, our artificial lift and cementing businesses showed excellent results in the first quarter, growing both revenue and…

Thanks, Jeff. Let's begin with an overview of our first quarter results compared to the first quarter of 2018. Total company revenue for the quarter was $5.7 billion, essentially flat year-over-year, while adjusted operating income was $426 million, a 31% decrease. Now let me take a moment to discuss our divisional results. In our Completion and Production division, revenue was $3.7 billion, a decrease of 4% and operating income was $368 million, a decrease of 26%. These results were primarily driven by increased stimulation activity in North America, which was offset by lower pricing. The Completion and Production division also benefited from higher artificial lift and cementing activity in U.S land, increased stimulation activity in Latin America and higher completion tool sales in the Middle East/Asia and Latin America regions. In our Drilling and Evaluation division, revenue increased 7% to $2.1 billion, driven by activity improvement across all regions. Operating income was $123 million, a decrease of 35%. These results were primarily driven by mobilization cost that we incurred on multiple international drilling projects, coupled with reduced project management activity and lower pricing in the Middle East. Moving to our geographical results. In North America, revenue decreased 7%, primarily driven by lower pricing in stimulation services, partially offset by higher artificial lift, cementing and stimulation services activity. Latin America revenue increased 28%. This increase was driven by higher activity for the majority of our product service lines in Mexico, increased stimulation work in Argentina and improved fluids activity throughout the region, partially offset by reduced drilling and testing activity in Brazil. Turning to Europe/Africa/CIS, revenue grew 4% driven by higher activity across multiple product service lines in Ghana and the United Kingdom. These results were partially offset by lower drilling activity in Azerbaijan. In Middle East/Asia revenue increased 7% year-over-year,…

Thanks, Lance. More than ever we're focused on exercising prudent capital allocation to the right priorities. We have solid long-term strategies aligned with value generation for our shareholders. We will continue to expand in the product service lines and penetrate the markets where we see opportunities to generate growth and returns. As we implement these strategies, we expect to generate economic and technical differentiation that will lead to higher returns and free cash flow. There are three main areas where we're investing this year and I will walk you through each one of them. First, we will continue to enhance the competitiveness of our Sperry drilling product line. I’ve talked to you a lot about iCruise, the new rotary steerable platform we introduced last year. The global rollout of this advanced drilling technology is on track with the tool already working in Argentina, the Middle East and across the U.S shale basins. We are currently building out the tool inventory and by the end of 2019, iCruise will constitute over a third of our rotary steerable fleet. Growth in the higher margin rotary steerable market is extremely encouraging, but conventional motors remain the workhorse of directional drilling, especially on land. Another initiative we undertook at Sperry to increase our competitiveness and differentiation was to launch our Motors Center of Excellence. It is a new approach to drilling motor development that combines specialized engineering and manufacturing capabilities to customize motor designs for specific basin challenges. The center deploys the latest mechanical engineering expertise to build more durable motors that drill faster and allow for longer runs with a higher rate of penetration. We have assembled a dedicated team of scientists in bearing and power section design, polymer chemistry and materials that is focused on accelerating research and development activities to deliver…

Thank you. [Operator Instructions] And our first question comes from Angie Sedita of Goldman Sachs. Your line is now open.

Thanks. Good morning, guys.

Good morning, Angie. Welcome back.

Thank you. Glad to be back. So, Jeff, maybe we could touch on your commentary on the worst in pricing is behind us. Is that -- give us a little color there. Does that imply that the pricing pressure is not completely gone? And then, also you touched on your levers to drive margins and of course, utilization and operational efficiency does drive margins in a big way. So can you talk about those levers and how much more you have to pull there?

Thanks, Angie. The -- I’d say the worst is behind us. That doesn’t mean there's nothing, but it also means that when we look at the market and how it's shaping up, that does -- will there be some trickling effects, potentially I'm not going to give precision around our strategy there. But what I will tell you is that we’re saying no where the thresholds aren't met, which gives me confidence. And then aligning that with what we see around activity and tightening capacity, which all of that should progress as the year goes on and I view that as lending of support to pricing being behind us.

Okay. And so does that -- with the tightening capacity and you talked about the attrition that’s ongoing, do you -- what’s your thoughts on pricing for the back half of the year or is that more of a 2020 event?

Yes, again, I'm not going to try to pick the date on where things are. I think broadly though our view is that we will see tightening capacity on the balance throughout the year. I described how hard equipment is working. Also, the capital discipline that our customers see, we see the same and so I think the reduction in CapEx or the actual -- the discipline around CapEx goes a long way to support balancing of the market. Now when does it balance? I think it's more balanced later in the year certainly than it is today. So I think that's all supported.

Okay. And then as a -- unrelated comment, but a follow-up. The reorganization in the U.S land can you give us more color there? Is there a cost savings opportunity for the reorganization or is this more operational changes?

Look there's always cost associated with reorganization, but let me focus on making us more efficient and more nimble. So couple of years ago we took a fair amount of cost out, but most of that cost came in the form of an organization that would operate more efficiently and more quickly and it's really what we're doing here. This is not targeted at frontline by any means. What this is more around how do we brighten the lines and more quickly operate, make decisions and go to market. Now efficiency or lower cost is useful in any market in terms of driving performance, but that's not the intent.

Right. Great. Thanks. I'll turn it over.

Thanks.

Thank you. And our next question comes from James West of Evercore ISI. Your line is now open.

Hey, good morning, guys.

Good morning, James.

Good morning, James.

So, Jeff and Lance, on North America real quick, I think this is pretty easy to respond to, but one, are you stacking fleets now, if you can't get the appropriate return? And two, are you starting to see a push towards maybe a rebundling, meaning that as the operators have debundled previously when they were spending as much they could, now that their budgets are -- have shrunk in size, perhaps the rebundling, the reorganization, the better collaboration part of the business should start to unfold. I’m curious on both of those topics.

Yes. Thanks, James. On the first topic, we did stack equipment in the first quarter and I'm not going to go any further than that, but as we look at the market and look at returns on equipment that causes to make those decisions and we will continue to manage our business around returns. The second question though was around rebundling and look I've always had a view that over time those things that make sense to come back together do. I think we are early days of that, but there is just such an elegance and efficiency around how things fit together. That doesn't mean we're not very competitive with each slice and I think we demonstrated that. But at some point once the pieces and parts have been examined you start to see, wow, it's a lot simpler to put those pieces and parts back together but to come, James, but I feel good about where we are in that process.

Okay. Okay, got it. And then on the international side, Jeff it sounds like you’re a bit more bullish now than you were maybe a quarter ago. I guess, one, is that fair to say? And then, the second is kind of top line looks like it's going to be pretty strong this year. It has been strong, you’ve been outperforming. When do you think the bottom line or the incrementals start to outpace normalized incrementals?

Yes, thanks. The -- look, I think what gives me more confidence is how broad-based this recovery looks today. And so we start to see not just a green shoot here and there, but I think as I described in my commentary nearly every region I talked about in terms of some form of growth we also see are broadening base of offshore sort of activity, not maybe activity and also the tendering activity that leads to more activity as we go into 2020. From a margin standpoint, I will focus those comments on D&E, obviously. We expect stronger decrementals as we -- incrementals, excuse me, stronger incremental to clarify that. What we saw in the first quarter, James, was I mean it really was a mix of different things both mobilizations that generally get done at midyear as we move to the year, the mix of services, there's a real pricing impact from the Middle East that we saw, I mean, a lot of the tender activity that happened in '18, it all started in earnest on January 1 of this year. So we saw some of that.

Okay.

But what’s important, I think is, we expect strong incrementals in the Q2 for that business and clearly Q1 in my view is a bottom for D&E margins.

Got it. Okay, great. Thanks, Jeff. Thanks, Lance.

Thank you.

Thanks, James.

Thank you. And our next question comes from Jud Bailey of Wells Fargo. Your line is now open.

Thank you. Good morning.

Good morning, Judson.

Hey, Jeff, you started off your comments by saying what a difference 90 days makes and that’s probably appropriate. Could you maybe talk about how you’ve seen the year progress from -- I'm sticking to North America and how maybe customer tone or conversations have changed, and to the extent visibility over the next couple of quarters, or even the back half of the year has or has not improved as the macro environment has kind of stabilized here?

Well, I think the macro environment stabilizing is the key point. I mean in 90 days ago, we were coming off what was -- wasn't a clear path for commodity prices, obviously Q4 was pretty hard on everyone. So in the range of 90 days, commodity price set up. What we had thought would happen has happened in terms of customers going back to work. And as I said in my commentary, sort of each month was progressively building and that shapes our view. You know as we talk with customers, we look at the calendar, those things are all constructive as we look out to the next couple of quarters. More specifically around the second half of the year, a couple of ways we think about that, but I think importantly, is the production targets that are out there today, all of that require some level of completion activity to meet that. I also think that some part of the CapEx reduction gets captured in sort of other things, that’s -- whether it's sand or service price deflation and maybe lowering rig count a bit. And I think the last question really be around, what do the smaller operators do going into the back half of the year? And I think they may be the most opportunistic, it's most important to them also just with the smaller asset base investing in completions really matters a lot to the value, not just of the asset, but likely the company.

Okay. I appreciate the color there. And my follow-up is maybe for Lance. Your guidance on C&P revenues up mid single digits, my impression is that pricing is still on average a bit of a headwind as we head into the second quarter. Can you maybe give us your thoughts on how much the lag effect from the pricing weakness throughout 1Q impacts how C&P revenue growth looks in the second quarter? Just trying to balance what’s the volume and what’s -- what the headwind on pricing is?

Yes, I think -- thanks, Jud. I think the -- it kind of goes back to what Jeff was saying maybe an earlier comment, I think you may see some of the trickling effect to continue from the pricing side, but it's more than offset by the level of activity that we see, which is what informs our guidance, so it's really volume related with some modest impact from pricing.

Okay. All right. I appreciate the color. I will turn it back.

Thank you. And our next question comes from Bill Herbert of Simmons. Your line is now open.

Thanks. Good morning.

Hi, Bill.

Good morning. Jeff, when you speak about the second half, is this -- and your frac calendar specifically, is this based upon specific visibility, which is populating the frac calendar or kind of a plausible expectation that completions needs to move higher even, I mean, for any number of reasons including meeting customer budgets, filling Permian pipes etcetera? So distinguish between optionality and actually tangible visibility that’s unfolding.

Yes, Bill, the -- we've got visibility in the calendar out a couple of quarters and so we've got a view of that and that's more specific. As we look further in the year, particularly the back half, I think there are some sign posts that we look for in terms of production targets met, not met, also around rig count with smaller operators, what that may look like. And I think that cadence also could be different in different basins, but I think we obviously have discussions with customers and I think there's -- it's quite a mixed bag in terms of outlook and how they plan to manage activity throughout the year, but we are asking those kind of questions certainly earlier than we have in the past and I feel like with our business development organization and ability to be very sharp around the edges in terms of where we’re and how we perform, I feel confident in at least Halliburton's outlook for the balance of the year.

Okay. Thank you. And then with regard to international margins, it seems like at least in the ordering the elements conspiring to weaker D&E margins in Q1 that the major issue with this was the mobilization expense associated with several different drilling projects, that’s a transient issue. So I’m curious as to when the mobilization -- well, first of all, how broad was the mobilization headwind in Q1 apart from the North Sea? Secondly, when does that abate? And thirdly, doesn't that represent a nice margin opportunity in the second half of the year?

Yes, Bill. This is Lance. Look, I think there's opportunity and we do expect D&E margins to improve throughout the course of the year. I think we've been pretty vocal around that. While the mobilization sure will provide that uplift, it's not to discount the pricing pressure that we continue to see in the Middle East.

Okay.

Right. I mean -- so, as we get through the first half of this year, we expect D&E margins to be markedly improved in the second half to sort of land at flat year-over-year margins in D&E.

Okay. So it's flat year-over-year margins for FY19 or second half versus second half?

Flat year -- FY19.

Okay. Thank you very much, sir.

Yes.

Thank you. And our next question comes from Scott Gruber of Citigroup. Your line is now open.

Yes, good morning.

Good morning, Scott.

Good morning, Scott.

Jeff, you mentioned in your prepared remarks that the U.S market is likely settling into one that’s less volatile, which would be good for you. It sounds like mainly a demand comment and obviously there's only so much you can control. Have you thought about ways of further reducing the volatility from your side, and how do you think about customer exposure? Does the growth of the majors presents an opportunity to tender into some contracts, which maybe stickier and longer term? Is there an ability to look at the E&Ps, given that they are settling into a spending cadence that maybe steadier? Is there an ability to go after some longer term deals with them? How do you think about overall reducing the volatility in the business?

Yes, without going into like specific things that we do, I mean, what you’re saying, obviously, we think about that. We’ve historically -- and look we do a lot of business with IOCs, we do a lot of business with all -- all of the customers in the marketplace along different of those 14 service lines that we have. But we’ve -- historically, we've optimized our frac fleet around what we view as the most efficient customers, we could drive the most margin. But I also think with the industrialization of shale sort of at scale, larger scale today, those types of things become more attractive and so we’ve good relationships, we’ve the ability to scale to those growth plans. And look and we plan -- plan to do so, but we're going to do it always with an eye to what are the best returns for our shareholders.

Got it. And then you mentioned 20% efficiency gains in frac over the last two years, how should we think about those gains in '19 and '20? Are you seeing efficiency improvement on par is starting to slow, just some color on that trend as well would be great.

Yes, I think we are seeing that. Through a degree we are reaching some sort of maximum velocity here just in terms of hours a day. If I would think back there have been some big sort of milestones in efficiency when Halliburton has been at the front edge of each of those. So the first was going from 12 to 24-hour a day operations, that was a big step. Next was more around zipper fracs as opposed to single well fracs and then multi-well pads as opposed to single well pads. All of those are sort of structural step changes. We’ve done a lot at the margin around being more efficient and our focus is taking capital off location not putting more capital on location. And so we do some things to drive our capital efficiency, but the big steps, I don’t necessarily see those today. What I really see over the next cycle or the next few years is more emphasis around what’s happening around the well bore as opposed to on surface and you hear a lot of discussion around that. But I say that to include everything from parent child, the spacing, the velocity, the all of these other things that we believe and I believe will have more impact on productivity and efficiency over the next three, five years.

If you had to put a number on the efficiency improvement this year, what would you peg it at?

I don't know. Less than it's been. I would just call it 5%, 10% maybe in that range.

Okay, appreciate it. Thank you.

Thank you.

Thank you. And our next question comes from Sean Meakim of JP Morgan. Your line is now open.

Thank you. Good morning.

Good morning, Sean.

Sean.

So you mentioned, you've got a lot of different levers to drive cash flow depending on what the market gives you. I think a lot of your 2019 CapEx budget was committed prior to the reduction that you took end of the year. So, conceptually, if 2020 looks a lot like 2019, in other words, activity in North America is comparable, international's improving modestly, could your CapEx budget take another cut lower as some of the recent growth initiatives in Drilling & Production start to roll off?

Yes, thanks Sean. Look, I think in terms of the sort of CapEx to revenue relationship that we sit at today, I believe it was like high 6% is lower than it's been on average over the last 10 years where we've averaged closer to 10%. I think, clearly this year, we've been pretty vocal about what buckets we're out spending as a part of that $1.6 billion of CapEx. I don't know that that -- to me, it feels like in and around 7% today, feels like a good number even for next year. Now the slices of that pie, right, as we go -- as we think about how we invest may change, but I think the rate of CapEx spend as we reinvest in the business feels pretty good.

Well, maybe just step in there too. I mean when we think about the outlook. I mean, we are focused on what I would call returns focused growth. And so if we think about where we are spending this year, we are continuing to invest in strategic initiatives and we are building out sort of our Sperry iCruise fleet and investing in international growth. So we are doing all of that today, sort of in and round where we and sort of the 7% -- 6%, 7% of revenues today. So it feels sustainable to me and I don't see this as a shift in our approach. I mean in this market, that level of spend is appropriate to generate returns.

Got it. Thank you for that feedback. And just one point of clarification, when you highlighted pricing pressure in the Middle East, is it -- were you considering this to be incremental pressure from customers, or is this really just a rolling through of contracts that were won last year?

Well, it's -- principally, what we see in this quarter is the rolling over or the establishment beginning of contracts at lower prices. It doesn't necessarily mean that it's abated. But it is certainly that's what we are seeing now, somewhere in the -- as we look ahead, we will work on how to optimize things and perform more profitably over time.

And so, would you say that -- would you characterize the magnitude of the decline due to the mobilization and that pricing basically in line with what you would've expected for the quarter?

Yes, that's -- no that's what we’ve generally thought we'd see and we also saw a number of things that I described in my comments with mobilization, that pricing, also weather in the North Sea was pretty tough this quarter more so than probably we'd have expected. So those sorts of things.

Very good. Okay, thank you.

Thanks, Sean.

Thank you. And our next question comes from Chase Mulvehill of Bank of America Merrill Lynch. Your line is now open.

Chase, are you there?

Please check your mute button. And our next question comes from Kurt Hallead of RBC. Your line is now open.

Hey, good morning, everybody.

Good morning, Kurt.

Hey, I just had a follow-up question here. When you guys are talking about the overall spending activity -- spending levels for the U.S being down 6% to 10% and for international kind of be up high single digits, when we look at say Completion and Production and we look at Drilling and Evaluation, would it be safe to assume that in aggregate Completion and Production would be up, like you say completion activity be up, so I would imagine that overall C&P revenues to be up on a year-on-year basis, maybe in that high single-digit range, and think adversely on Drilling and Evaluation with the drilling activity being down in the U.S., that kind of offsetting growth internationally. So I just wanted to try to get a general sense, so C&P up kind of on a year-on-year revenue and D&E maybe kind of flattish. Is that kind of a safe way to think about it right now?

The way that I would think about it, Kurt, is that -- I mean and we've mentioned this I think in some of our prepared remarks was that we expect our completions activity to be sort of flat year-over-year, right? Even though spend is down in North America, that takes the form of lower sand pricing or lower drilling expenditures versus the actual completions activity. And then as we think about D&E, particularly driven by the international markets, we see a broad recovery, pockets of pricing improvement, but also weighed down by pretty competitive Middle East today. So it's a balance of all of that.

Got it. I appreciate that, Lance. And then, Jeff, maybe follow-up for you. I know you've had a very continuous focus on returns and that being the key mantra, one of the key mantras for the company. I was wondering if you could give us some perspectives on how you think about return thresholds and when you think about it in the context, is it -- when you think about our through cycle, is that a 3-year period, 5-year period, 10-year period, kind of some general insights on that dynamic would be helpful.

Look, when I think about returns, broadly, I think the -- I think about sustained growth over a period of time and I also believe that the value for growth at any cost is over and so when we will talk about returns focused growth, that’s the right kind of growth. And look, I feel great about Halliburton in this kind of paradigm. I mean, we've always been returns focused, clearly it starts with margins, so improving pricing and managing costs, we are always managing costs in that environment. And then I think disciplined investing, I think that maybe informs more of what you're asking, but we make capital scarce when we need to make capital scarce and we are also and might be investing in the right businesses. So if we think about lift and chemicals and where we've put our CapEx, we will do that very thoughtfully and certainly focused on returns.

Okay. That's helpful. And maybe one follow-up just on the attrition comment, Jeff, you referenced earlier that 7.5 million horsepower will need to be rebuilt in '19 and you wouldn't think the spending level required to rebuild that equipment would happen. So in the context of attrition then, how much horsepower do you think could shake out of the market this year?

Kurt, this is Lance. I think it's tough to call -- hard to really put a number on it, right? I mean, I think attrition has always been a tough one to try to define in the pressure pumping industry. But one that we know it's happening because we see what it's -- how it's working on our fleet, right and we talked about some of the stats that we had in our prepared remarks, you can't ignore it. And today we know that there's under-investment. We know that there's more pressure than ever on all of the fleet in North America around wear and tear and therefore the repair and maintenance costs associated with it and the burden that a lot of our space has had to shoulder it, I think, look, at the end of the day, there's going to be some that are just going to flat out, be retired.

Got it. Right. That’s helpful. Thank you very much.

Thanks, Kurt.

Thanks.

Thank you. And our next question comes from Dan Boyd of BMO Capital Markets. Your line is now open.

Hey, thanks, guys.

Hi, Dan.

One of the follow-up on the international outlook, you put up a 11% growth in the first quarter, the guide for the second quarter sounds like about 10% first half growth year-on-year and presumably the mobilization costs you are calling out suggests continued growth in the back half. So just wondering what keeps you with a little bit more of a conservative high single-digit revenue number for the year?

Look, we want to be very realistic about what we see unfolding in the market. I think the -- a lot of the tender activity that we see today is probably not going to begin until 2020 and so we see activity building, but we are also going to be -- I’ve talked about returns focused growth. And that’s part of that discussion is making sure that we are investing and pursuing the right things. And look, we are really encouraged. In fact, I think what we will see is growth as I described in '19 and then certainly building into 2020 as sort of that broad based sort of offshore activity starts as opposed to being tendered and talked about. So encouraged, but again, we are going to manage our business.

Yes, just being conservative. Lance, I wanted to follow-up on Bill's question on the D&E margins. So, in order to keep them flat year-on-year it sounds like we need to exit the year in the fourth quarter low double digits. And so just wondering as you look past mobilization cost that you are incurring, is that a number that you sort of see without pricing and without big contract wins from here on out, but basically is how de-risked is that low double-digit margin?

Well, look, I mean we are going to have to work towards it, no doubt. But I think the tailwind that you get as you begin to put revenues across the costs that we’ve been running and around the actions that we are taking in the North Sea and those mobilizations, I also think that we expect to start to see some benefit as we get more Sperry tools in the market. I think we told you that a third of the Sperry fleet will be iCruise by the end of the year, we are working hard to get those tools out, that’s part of the working capital build that you saw on the inventory side that I mentioned in my commentary around the international strategic investments and so those are the things that give me confidence that we can continue to build on what we need to get to those commitments.

All right. Thank you.

Thanks, Dan.

Thank you. And our final question comes from the line of Marc Bianchi of Cowen. Your line is now open.

Hi. Thank you. First question just back to the pricing discussion for North America, Jeff, you noted the 14 product service lines that Halliburton offers. Is there any distinction among those lines in terms of where pricing is bottoming, specifically everybody is focused on frac, but as you mentioned you are a big player in cementing, there's been some concern about cementing competition. Just curious if there's any distinction you could offer on those product lines?

Yes, I’m going to -- it's a very competitive space in North America so I’m not going to get any more detailed around pricing and where the other service lines are. Clearly, hydraulic fracturing is probably the biggest piece of sort of the North America landscape today and it probably is the most over supplied, so I will leave it at that.

Okay. Thanks for that. And then, Lance, in terms of the outlook for free cash flow growth for the year, big working capital consumption here in the first quarter, which is seasonal. Would you anticipate working capital for the year to be a neutral, a positive, or negative?

Well, I think we are going to see a lot of benefit as we sort of work through the DSOs that we’ve built up in the first quarter of the year, I think we will continue to work down a lot of the inventory that we built up, I would suspect that -- the working capital does release cash some point throughout the year.

Okay, super. Thanks so much.

Thanks, Marc.

Thanks, Marc.

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the conference back over to management for closing remarks.

Yes. Thank you, Candice. Before we wrap up the call, I would just like to highlight a few points. First, I’m excited about the broad-based international recovery that we see unfolding and Halliburton is well positioned to take advantage of this growth. Second, I believe that demand for North America completions will be up modestly over the next few quarters and that capacity will tighten over the balance of the year. Finally, our focus on capital discipline, capacity tightening, and cost management will deliver leading returns and free cash flow in excess of last year. Look, I look forward to speaking with you again next quarter. Candice, please close out the call.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day.