Earnings Labs

Nabors Industries Ltd. (NBR)

Q1 2014 Earnings Call· Wed, Apr 23, 2014

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Transcript

Operator

Operator

Good morning, and welcome to the Nabors Industries First Quarter Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mr. Dennis Smith, Director of Corporate Development. Please go ahead.

Dennis A. Smith

Management

Good morning, everyone, and thank you for joining our first quarter 2014 earnings conference call this morning. We will follow our customary format today with Tony Petrello, our Chairman and Chief Executive Officer; and William Restrepo, our Chief Financial Officer providing our perspective on the quarter’s results and provide you with insight into the trends in our markets and anticipated influence on our business. In support of his remarks, we have posted some slides to our website, which you can access following along, if you desire. They are available in two ways. If you are participating by webcast, they’re available as a download within the webcast. Alternatively, you can download them from nabors.com under Investor Relations in the submenu, Events Calendar. And you will find them listed as supporting materials under the conference call listing. With us today, in addition to Tony, William, and myself, are Laura Doerre, our General Counsel; Clark Wood, our Principal Accounting Officer; and all other heads of our various business units. Since much of our remarks today will concern our expectations in the future, they may constitute forward-looking statements within the meaning of the Securities 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. Now, I will turn the call over to Tony to begin.

Anthony G. Petrello

Management

Good morning. Welcome to the Nabors Industries Conference Call to review our results for the first quarter of 2014. Thank you for participating this morning. As Denny mentioned, we have posted the quarterly presentation slides on nabors.com. I will refer to these by slide number during my remarks. I want to officially welcome William Restrepo to the Nabors family. I think he will provide a great addition to the company and he is going to be available for the analyst community to help with financial questions and operating questions as well. And I think he will make information more seamless and available to the investment community. I would like to make my opening remarks, William will then discuss the first quarter results, and then I will wrap up before we take questions. Yesterday, we announced our results for the first quarter, which exceeded our expectation from last month when we provided guidance to account for adverse weather conditions in the Northern United States. Our EPS from continuing operations totaled $0.16. Excluding our weather impact to completion segment, all other businesses delivered strong operational performance throughout the quarter and even our completion segment had the highest monthly utilization in recent times during the month of March. Absence of weather-impacting completions, our first quarter earnings were driven primarily by first another strong performance in our International Towing business; second, activity improvements from the U.S. Lower 48 segment excluded the impact of the fourth quarter’s early termination revenue; third, seasonal improvements in the U.S. for offshore Alaska and Canadian drilling operations; and fourth, continued progression into Production Services segment from higher revenue in the recently acquired KVS trucking business. Our Rig Services, which consists mainly of Canrig, reported its best performance in over a year. Results in the Rig Services segment benefited from…

William Restrepo

Chief Financial Officer

Thank you, Tony, and good morning, everyone. For those following our slide presentation, our consolidated financial results are illustrated on slide number five. Net income from continuing operations was $49 million or $0.16 per diluted share compared to $92 million or $0.31 per share in the first quarter of 2013 and $129 million or $0.42 per share in the fourth quarter of 2013. The sequential decrease was principally driven by the following four items: first, the $0.16 per share reduction in completion services mainly from the first quarter’s adverse weather conditions; second, $0.12 per share of various income tax benefits in the fourth quarter of last year; third, $9 million or $0.02 per share from the favorable settlement of a previously reserved customer bankruptcy; and fourth, $5 million or $0.01 per share of lump some early termination revenue in the U.S. drilling business. Operating revenue and earnings from unconsolidated affiliates totaled $1.6 billion in the quarter, essentially flat sequentially and up modestly compared to the first quarter of 2013. Operating income was $109 million compared to a $133 million in the first quarter of 2013 and $160 million in the fourth quarter of 2013. These reductions mainly reflect our completions business performance which fell by nearly $48 million sequentially and by over $51 million versus the comparable period of last year. The deterioration profitability was driven by the conclusion of our last remaining take or pay contract at the end of December 2013 and by unfavorable weather in critical geographical areas. As I mentioned in the net income comments, the sequential comparison also includes lump some early termination payments of $5 million as well as $9 million from the full recovery of a receivable from a bankrupt customer, both of these items in the fourth quarter of 2013. EBITDA was…

Anthony G. Petrello

Management

Thank you, William. Let me summarize our views and priorities. First, drilling markets continue to improve globally. We see this trend most prominently in the high-spec segment of the market that is where Nabors traditionally focuses and where we see opportunities to deploy capital and attractive returns. Second, the execution of our major capital projects is proceeding smoothly. The scale of our current capital program is unprecedented in the company’s history and our combined teams are successfully delivering high-performance rigs on time and on budget. Third, our efforts to streamline the company’s activities are continuing. We are perusing opportunities to prove non-core assets in multiple lines of business. We are also consolidating functions where that make sense. A quarter ago, our outlook for the year called for a soft start. We experienced an even greater challenge in completion services. Our expectation remains intact for earnings to improve as the year progresses, especially in the second half. Looking further, the outlook is positive and we’re positioning Nabors to capitalize on that environment. Thank you for the time this morning. With that, I will take your questions.

Operator

Operator

We will now begin the question-and-answer session (Operator Instructions). Our first question comes from Jim Crandell of Cowen. Please go ahead. Jim D. Crandell – Cowen & Co. LLC: Good morning, Tony and team and William, welcome to Nabors.

Anthony G. Petrello

Management

Thank you, Jim.

William Restrepo

Chief Financial Officer

Thank you. Jim D. Crandell – Cowen & Co. LLC: And also my condolences to everyone in Nabors from your recent loss.

Anthony G. Petrello

Management

Very much appreciate it. Jim D. Crandell – Cowen & Co. LLC: Tony, I wanted to first ask about pressure pumping, you talked about the prospects for increased pricing, are you actually seeing that now in any regions and what is that exactly that makes you optimistic? Is it the tightening utilization you see out there in the field today?

Anthony G. Petrello

Management

Let me first try to answer that, put some context around your question. Last fall commodity prices were oil around 88 and get through 50 at the time operator budgets were done. They are now about 102 and 480, and so all the reports from the operators is that cash flow is running more robust. The second thing is you’re obviously seeing more pads, you’re seeing more laterals per pad, and you’re seeing more prop per well. And I see 215 well pads moving north, and if you just look at our utilization, we’ve had an increase in 50% of work on pads as well. Then layer that on top of the following, which we’re running on 24-hour basis 75% of our spreads are running on 24-hour basis. Now, I think there is a lot of literature out there about the capacity of the frac spreads, and I don’t pretend to have any more greater insight towards that number is whether it’s $3 million actual horsepower or whatever. But I do suspect whatever that number is, it’s nominally overstated, and I also suspect given the number I just gave in terms of 24-hour crews the amount of burning up that we are doing of the equipment is…

William Restrepo

Chief Financial Officer

Hello?

Operator

Operator

Pardon me, this is the conference operator. Jim D. Crandell – Cowen & Co. LLC: Hi, this is Jim Crandell, I was asking you a question and it was cut off.

Operator

Operator

Yes, I do see that, one moment. Actually one moment here. Mr. Denny Smith.

Dennis A. Smith

Management

Yeah.

Operator

Operator

Petrello or you gentlemen….

Anthony G. Petrello

Management

Yes.

Operator

Operator

So they may still on, I was cut off there. Jim D. Crandell – Cowen & Co. LLC: Yes. We hear you.

Anthony G. Petrello

Management

We can hear, Jim.

William Restrepo

Chief Financial Officer

We hear you, Jim Jim D. Crandell – Cowen & Co. LLC: Okay. I’m sorry. I was cut off, but now I’m back on. I missed the end of your response, Tony, but just move on to a follow-up question. You’ve been having great success with getting the orders for your PACE-X. My question is about the performance of the rig to-date, or can you indicate strong performance in the rig? And what – is there a primary factor or two that you can attribute that performance too?

Anthony G. Petrello

Management

Well, so I think that there is a slide in the slide deck at on page 10, where everyone talks about how great the rigs are and it’s very hard with apples-to-apples comparison. So I have been very reluctant to start saying one rig is better than the other rig, because of the apples-to-apples comparisons, but what we did here in this slide is just give a context to show that our rigs are not second to anybody is we went to a customer in a field, where our rig is now working and the competitor rigs they’re well know are in that same field working the same type of job and you can see the dramatic fee per day difference. That’s due to, I think the configuration of the rig and it’s due to the including the horsepower and a bunch of other things on the rig. So, I think the difference is real and I think as you move to pads with multi, as we have talk like this before in terms of what phase excess designed to do its really. It shines in for those operators that wanted to do, multi-wells on pads, particularly multi-wells like lines – I would say four rows of four wells each. That’s where the rigs really shines and I think that kind of work is going to continue I think everything the PACE- X has over the other competitor rigs has a spacing advantage that in terms of size and location. With all the pressure on operators to minimize space which that transmits to costs, it also translates into getting approvals. I think that’s another advantage of the rig. So now I think we – to the extent – this is obviously a bed on pad drilling, but I think the market’s moving in that direction. Jim D. Crandell – Cowen & Co. LLC: Okay. Then just one quick follow-up to that, Tony. You have been building in advance of contracts here because of your confidence, I think, in A, the market, and B, the rig’s performance. Do you see yourself continuing to do that in the future? Might you get even more aggressive in that regard?

Anthony G. Petrello

Management

The answer is to both yes. Jim D. Crandell – Cowen & Co. LLC: Okay. Okay. Terrific. Thank you very much.

Operator

Operator

Our next question comes from Ole Slorer of Morgan Stanley. Please go ahead. Ole H. Slorer – Morgan Stanley & Co. LLC: Thank you. And, Bill, congratulations again with the move. I suppose all we should do from now on is to follow your every move, because you seem to have an impeccable track record in exiting and entering businesses?

William Restrepo

Chief Financial Officer

Thank you, Ole it was not improved this although. Ole H. Slorer – Morgan Stanley & Co. LLC: I don’t believe it for a second. This is not a coincidence, if I look at your track record on entering and exiting. So very positive backdrop all around. Could you help us a little bit with the timing of the international, I think, on North America? Everybody can probably do their own models, but when it comes to the international progress, I mean, you are highlighting a ton on your contract, on what appears to be very profitable terms. At the same time, you are highlighting some near-term misses on the Mexico land and the offshore and Saudi jackups. That’s supposed to Saudi jackup is all incremental, negative this second quarter, but how do you see the EBITDA move for your international drilling operations sequentially into the second quarter with these kind of near-term headwinds and strong tailwinds into the back end of the year?

William Restrepo

Chief Financial Officer

Yes, well with that was standing the jackup not going back to work and the transitory effects, we see going into the second quarter at least as well as for the first quarter. And then we see a ramping up internationally in third and fourth quarters. So we see that as the transitory things we talked about those negative were being offset by the early deployment of things we’ve spoken about, and then by the third and fourth quarter those things begin to have a substantial impact when you start to see the ramp up. Ole H. Slorer – Morgan Stanley & Co. LLC: Okay. So flattish into the second quarter and then we start to get to the tailwind?

Anthony G. Petrello

Management

Yes, I think we’re going to have enough of the new stuff on there to make up for any of those transitory things we’ve spoken about, that’s what we’re working toward. And as you can see that sort of what happened this quarter as well, where we had some positive stuff, we came out a little bit better than what we thought given the negative stuff would be jackup. Ole H. Slorer – Morgan Stanley & Co. LLC: So if we look a year ahead until the first quarter of 2015, when they are getting for the full tailwind internationally, but also what you are describing in the U.S., would you care to shed some light on which of your four key divisions U.S., Canada, or international do you think will have the strongest EBITDA growth, percentage wise, year over year as we still look a year ahead, first quarter to first quarter

Anthony G. Petrello

Management

I think clearly International will. Ole H. Slorer – Morgan Stanley & Co. LLC: Thank you. If you look to the Production Services and Completion Services…

Anthony G. Petrello

Management

Yes… Ole H. Slorer – Morgan Stanley & Co. LLC: Clearly a disappointing result on the Completion Services there. But based on what you are seeing in the market right now and getting pressure pumping back to full utilization as you highlighted, what should a sensible near-term EBITDA margin be for that business?

Anthony G. Petrello

Management

In terms of absolute dollars I think we will – we should get back to at least the rate of EBITDA that we’re in the third and fourth quarter and that kind of range or the second quarter, on a consolidated basis for NCPS as a whole. Ole H. Slorer – Morgan Stanley & Co. LLC: And you highlighted some challenges around proppants, for example, was this because of the weather and was this relating to ceramics, the white sand or in general, could you shed some light on that and how you have solved that situation?

Anthony G. Petrello

Management

Yes, well on the supplier side, I don’t think we have problems. I think we have really good arrangements with suppliers and we are working on that in terms of further costs. I think there was issues with some deliver where the rail cars were baked up as suppliers, and that caused a bunch of congestion at the actual FLB plant sites. I think that is starting to ameliorate, and I think they is still a risk maybe at the endpoint of having that congestion repeat itself. But right now, we think we’re managing through it. And as we said in our prepared remarks in addition to that we have put an intense focus on some of the elements here in terms of chemicals, as well as try to reduce our costs and we think all that’s going to start manifesting itself from the second quarter.

William Restrepo

Chief Financial Officer

A quick comment, I think in the second we won’t see the full impact of the guar and chemical cost reductions, because they have to flow through inventory. But they will see enough to offset any increases in sand and proppant in general. Ole H. Slorer – Morgan Stanley & Co. LLC: Are you seeing increases in sand prices at the moment?

William Restrepo

Chief Financial Officer

We saw a little bit of tightness, that has increased slightly the cost of sand, but we feel it’s a temporary impact due to the weather – to the weather impact in the first quarter. Ole H. Slorer – Morgan Stanley & Co. LLC: Okay. Well, thanks a lot and congratulations with the corporate turnaround.

Anthony G. Petrello

Management

Thank you.

Operator

Operator

Our next question comes from Jim Wicklund of Credit Suisse. Please go ahead. Jim K. Wicklund – Credit Suisse Securities (USA): Good morning, guys.

Anthony G. Petrello

Management

Good morning. Jim K. Wicklund – Credit Suisse Securities (USA): You talk about the last remaining contract, the big take-or-pay contract. What is the difference between those contracts signed a couple years ago and the current spot market rate?

Anthony G. Petrello

Management

From the take-or-pay contracts are long term contracts first of all. A lot of them were signed, I think were signed sometime back. So the pricing is better than the spot-market today and basically the client is – during this life of the contract, the client is obligated to guarantee a minimum revenue for the month or for the periods in lots of those contracts. So obviously, that’s a more favorable and steady situation than competing in the spot market. But our team is open to the challenge, we have lost some margin obviously versus because of the timing when those contracts were signed, but we are seeing that our fleet adjusting to the new spot-market and already achieved stability in pricing and even starting to get more I won’t say aggressive but more confident and trying to achieve some pricing traction during the second quarter.

William Restrepo

Chief Financial Officer

In terms of the rates for forex recently talked about that we just renewed those are at a very attractive rates equal to a rate range that we have enjoyed previously, so just to give you an idea. Jim K. Wicklund – Credit Suisse Securities (USA): Okay. You’re talking about margins for your rig fleet at $9,400 and obviously that will skew higher as more PACE-X rigs go out. What do you guys think is where we can get in terms of margins before we start having somebody call up NOV and start fostering competition? Is there any risk of that in the future?

Anthony G. Petrello

Management

I mean there is always competition and all I think there is going to be demand for as we’ve said before we think about 300 of these, what we are call high-spec rigs. And I think yes, there is a risk there. The people are going to try to pursue that I think we have as good a mouse trap as anybody right now. We are going to forward and share that, but I’m not going to say that other people can try to access it. I think frankly the people have been within the business for a longer time, should be able to do it better and more cost effectively and deliver the performance with the rig and I think that’s where the advantages are for us. Jim K. Wicklund – Credit Suisse Securities (USA): Okay. Last question, if I could. The jackup rigs and barge rigs in the Gulf of Mexico, the barge rigs have been difficult for a while and the lower-end jackup market has been difficult. I know you have to have a bunch of different options on that, but would you be willing, just from a management point of view, to retire those so that you can focus on other parts of your business, or is that something that you think may one day come back?

Anthony G. Petrello

Management

We would probably at this point I think we don’t want exit the business, so we will do at the most cost effective way possible, that’s were has that right now. Jim K. Wicklund – Credit Suisse Securities (USA): Okay. Gentlemen thank you very much.

Operator

Operator

Our next question comes from Waqar Syed of Goldman Sachs. Please go ahead. Waqar Syed – Goldman Sachs & Co.: Thank you very much. I have a question on the US Lower 48 rig count. Looking forward, you have a bunch of PACE-X rigs coming in. Do you think the incremental rig count for your guys is going to be just driven by PACE-X, or do you see some of the conventional rigs, the Tier 2 or Tier 3 currently not working, go back to work as well?

Anthony G. Petrello

Management

Well this past quarter you saw a couple additional legacy exit go back to work and so that is happening obviously it not happened as robust – or hasn’t so far but I am going to turn it over to Joe to add more color to it.

Joe Hudson

Analyst · Goldman Sachs

The answer is we are continuing to see legacy assets back to work, we are going to continue to see that for the year PACE-X is incremental at this point. It’s not replacing legacy assets we have, so that is all accretive. The answer is we are going to increase the rig count.

William Restrepo

Chief Financial Officer

The other point I would like to make there is, if you look at our activity since the second quarter of 2013 I think we’ve taken 20 legacy rigs and redeployed them to international. And give what we still see the appetite of international is at there is still prospect of that as well. So like we’ve said before, we view the legacy rigs as an option on – an upside option, basically that’s approaching getting into money now with tightness we’re seeing Waqar Syed – Goldman Sachs & Co.: Okay. And, Joe, what is your current outlook for where the rig count, US land-to-rig count, could be by the fourth quarter of this year?

Joe Bruce

Analyst · Goldman Sachs

Nabors count? Waqar Syed – Goldman Sachs & Co.: Well, Nabors, as well as for the industry.

Anthony G. Petrello

Management

We still say it’s modestly higher.

Joe Bruce

Analyst · Goldman Sachs

Yes. We definitely think, again, with the build input, incremental PACE-X that Tony’s talk about I guess in the past two weeks we put four legacy assets up. So again, you’re moving to rig count up and I think the overall market will continue to improve rig count-wise

Dennis A. Smith

Management

Waqar, of the trends we think is afoot is that as we show on slide 12 is, productivity of rigs this is moderating a little bit. So increased spending is increasing wells, which is increasing rigs, whereas rig count been pretty good flat for the last 3.5 year. So, we think incremental rigs demand is there. Waqar Syed – Goldman Sachs & Co.: Are you seeing any demand at all in any of the gassier basins?

Joe Bruce

Analyst · Goldman Sachs

Yes. We’ve recently been awarded a few jobs in the Gulf Coast and South Louisiana. We are putting out our first 3,000 horsepower rig we done in years. So, we are seeing in the Gulf Coast part two to three rigs are going out to specific to gas market. Waqar Syed – Goldman Sachs & Co.: How about in the Northeast and Appalachia, Marcellus, in that area? Any demands right now for drilling?

Joe Bruce

Analyst · Goldman Sachs

Well, it’s somewhat flat. But, yes, I think the Marcellus will continue to improve. Yes, we are going to see some increase of that. Waqar Syed – Goldman Sachs & Co.: And Tony, just a broader question on restructuring. Where do you stand right now, and when do you think you will be able to make any decision on what direction to go with regards to the corporate restructuring that – any major steps in that regard?

Anthony G. Petrello

Management

I have nothing new to update, report. I think it continues to be a priority. We working on it full time basically, I think if you look our asset base, our collection assets today, it was really put together with the view toward appealing to the manufacture drilling in North America to cut the combination of both drilling side and the completion and production side. I think that the division of what is probably – the collection of assets is well suited for that I think the issue for us is the execution for optimal capital deployment and we’re figure out what we need to do to make that even better and that’s what the focus is on. So, in addition to that in terms of the structuring lead to some of the comments we have a series of internal issues we want to take in as well to improve. Improve our profitability as well. Some of the things that William referred to in terms of focus some of the procurement stuff of high significant dollar things and as much or similar initiatives on that across the company. So, one of the other things we’ve done just as quarter as we finally integrated our engineering group. Waqar Syed – Goldman Sachs & Co.: Great. Thank you very much.

Operator

Operator

Our next question come from Byron Pope of Tudor, Pickering, Holt. Please go ahead. Byron K. Pope – Tudor Pickering Holt & Co. Securities, Inc.: Good morning, guys.

Anthony G. Petrello

Management

Good morning. Byron K. Pope – Tudor Pickering Holt & Co. Securities, Inc.: Tony, you partially answered this question in your response to one of the prior questions when you talked about 20 or so rigs being – legacy rigs being deployed from the U.S., but I just wanted to probe a little further, because it sounded like on the international side, as you look at potential incremental opportunities in Saudi and Argentina and Kurdistan, all those are – seem to be geo markets where you have redeployed assets from the U.S. And so as you think about incremental rig contracting opportunities in those international theaters, are they such that you’re in a similar position to potentially redeploy some of those legacy SCR rigs from the U.S. market to those specific geo markets where you have already won some of that type of work?

Anthony G. Petrello

Management

I think you hit it right on the head, that’s exactly the plan. And I think the fact that, these awards were done shows that those market has a need and demand for that. And I think as we execute and execute well, it will justify the decision by the operators to do that. I mean one of the things I have emphasized to people is this international market doesn’t really make such a big difference between AC versus SCR, particularly in our case, because our SCR has our K-box functionality, which makes it act like an AC rig anyway, it’s where the power and other things around the rig. And having those that legacy infrastructure does allow us to have expedited cost of time of deployment, which matters as people start gearing up. And I think our job is to take advantage of that, that lead and convert into an opportunity [indiscernible][0:51:17] add any other comments. Anything else? Byron K. Pope – Tudor Pickering Holt & Co. Securities, Inc.: Okay. And then just a second question on the Canrig backlog build, is it reasonable to think that the driver of that is both North America and international top drive demand on both the capital equipment and rental side? Just curious as to what’s driving the big increase…

Anthony G. Petrello

Management

Yes, Canrig has – obviously it’s a primary product, it’s the top drive, but it also produces catwalks and wrenches and all three of those actually have seen recent increases, and it’s not just North America, it is International. Canrig has pretty good footprint in Algeria and Russia and China and Dubai. And so all those markets are now starting to see that demand as we mentioned about half of this backlog is third-party. Canrig is about to open an office in – or is in the process of opening an office in Dubai to improve their ability to locally services the top drives and really think in terms of the fact that we have a pretty large installed base that part of the world and try to capture some more that work as well. So that’s the time to play it right now. Byron K. Pope – Tudor Pickering Holt & Co. Securities, Inc.: Thanks, guys. I appreciate it.

Anthony G. Petrello

Management

Okay.

William Restrepo

Chief Financial Officer

And I think we are starting to approach our one-hour kind of self-imposed time, but let’s take one more question and wrap up the call please.

Operator

Operator

Sure, absolutely. And our next question comes from John Daniel of Simmons & Company. Please go ahead. John Daniel – Simmons & Company International: Hey, guys. Thanks for getting me in. First couple questions just on international. Given the newbuilds and repricing opportunities, can you explain for us, Tony, perhaps just a regional range for international cash margins in 2015, based on what you know today? John Daniel – Simmons & Company International: Broadly speaking within international. I mean, the cash margins were close to $16,000 Q4, dipped a bit here in Q1, and I know they will be low in Q2. With all that’s going on, the positive traction that you are getting, is it high teens for 2015? Just, again, based on what you know today, and I realize that changes.

Dennis A. Smith

Management

Yes, that’s rational. Not north of $20, but in the high teens range. Development And it varies a lot between some of the Latin America smaller stuff to obviously the at the top end

Joe Bruce

Analyst · Simmons & Company

Yes, that’s in the high teens. John Daniel – Simmons & Company International: High teens? Okay. Thank you. And then turning to the completion services segment, does any of the 2014 CapEx budget include any expansionary CapEx for that segment?

Dennis A. Smith

Management

Very, very little. John Daniel – Simmons & Company International: Okay.

Dennis A. Smith

Management

We are doing some – as William mentioned, some conversions to duel, we’re upgrading some of the control vans. A lot of refurbishment of equipment. John Daniel – Simmons & Company International: And then on the stack fleets, I think you have got, it looks like three in San Angelo. Is that right? What’s the prospect for redeployment there?

Dennis A. Smith

Management

Those are being refurbished, the fleets in San Angelo as referring to talks about and what’s our prospects putting back to work.

Joe Bruce

Analyst · Simmons & Company

Yes. One fleet can retrofit it right now is there any separate dual fuel little commencing operations for the later part of this quarter. And then this one of the fleet is getting referred when it can probably go out we are on the same time both curse have places to go. John Daniel – Simmons & Company International: Okay. Awesome. And then just a final quick one from me. The less P&A work in California, as they shift to more production enhancement, is there any impact of that material on margins or revenues with that type of shift?

Dennis A. Smith

Management

No. John Daniel – Simmons & Company International: Okay. Thanks guys.

William Restrepo

Chief Financial Officer

Thank you.

Anthony G. Petrello

Management

Thanks very much everyone.

Operator

Operator

This concludes our question-and-answer session. I’d like to turn the conference back over to Mr. Anthony G. Petrello for any closing remarks.

Anthony G. Petrello

Management

Thank you everyone for participating. Very much appreciate your continued interest in Nabors.

Dennis A. Smith

Management

Thank you, ladies and gentlemen with that we’ll wind up the call. Thanks.

Operator

Operator

Thank you. The conference is now concluded. Thank you, once again for attending today’s presentation. You may now all disconnect.