Greetings and welcome to the Newpark Resources First Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ken Dennard. Thank you. You may begin.

Thank you, operator and good morning everyone. We appreciate you joining us for the Newpark Resources conference call and webcast to review first quarter 2019 results. With me today are Paul Howes, Newpark’s President and Chief Executive Officer; Gregg Piontek, Chief Financial Officer; and Matthew Lanigan, President of the Mats Business. Following my remarks, management will provide a high level commentary on the financial details of the first quarter and outlook before opening the call to Q&A. Before I turn the call over to management, I have a few housekeeping details to run through. There will be a replay of today’s call. It will be available by webcast on the company’s website at newpark.com. There will also be a recorded replay available until May 9, 2019, and information to access that replay is included in yesterday’s release. Please note that the information reported on this call speaks only as of today, April 26, 2019, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of replay listening or transcript reading. In addition, comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Newpark’s management. However, various risks, uncertainties and contingencies could cause Newpark’s actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies. The comments today may also include certain non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in the quarterly press, which can be found on Newpark’s website. And now with that behind me, I’d like to turn the call over to Newpark’s President and CEO, Mr. Paul Howes. Paul?

Thank you, Ken, and good morning to everyone. Although the market softness and the international contract transitions in fluids had a greater-than-anticipated impact on first quarter results, we remain encouraged by our operational execution and continued commercial success in new markets. First quarter consolidated revenues were $211 million, representing a 15% decline from our strong fourth quarter results. In Fluids, revenues pulled back across all regions, resulting in a 10% sequential decline. In North America, revenues declined 4% sequentially to $116 million, reflecting the impact of the softer activity levels in the U.S. and the lack of the typical seasonal improvements in Canada. The decline in U.S. land was partially offset by the startup of two deepwater projects in the Gulf of Mexico. Meanwhile, international relevant news declined 21% sequentially, primarily reflecting the impact of the contract transitions in Algeria and Brazil and project delays in Eastern Europe as discussed on last quarter’s call. Despite sequential margin improvements in our U.S. business, segment operating income was negatively impacted by the softer revenues as well as the inherent cost inefficiencies that result from the contract transitions and project delays. In addition, the first quarter included $1.1 million of charges associated with the retirement policy modification and employee severance, resulting in a 2.4% segment operating margin. As we look forward to the remainder of 2019, we continue to believe that Q1 will serve as an inflection point with respect to segment revenues and operating margins as we expect both to improve going forward. Aside from Canada, we expect activity to increase from Q1 levels, benefiting from the impact of new contract awards and stabilizing commodity price outlook. I am pleased to note that our work with Shell Oil was recently expanded to include fluids work for an additional deepwater drillship in the Gulf of Mexico. This work is expected to begin in the second quarter and continued into early 2020. Internationally, we also received a new award from ENI to provide drilling and completion fluids as well as related services in Italy, covering a 3-year term. Work under this contract is expected to start in the second quarter and generate $10 million to $15 million of revenue per year. Turning to the Mats segment, we continue to be pleased with the consistent operational execution and steady progress in our diversification strategy. First quarter revenues were $51 million. As we highlighted in last quarter’s call, we anticipated the pullback from the record level of direct sales we enjoyed in Q4 which benefited from high year-end demand. Notwithstanding this sequential decline in revenues, the segment delivered 27% operating margin which benefited from a favorable revenue mix, disciplined cost controls and our ongoing efforts to focus on opportunities that provide stronger returns, particularly given the tight U.S. labor market. And with that, I’d like to turn the call over to Gregg to discuss the financial details of the quarter. Gregg?

Thanks, Paul, and good morning, everyone. I’ll begin by covering the specifics of the segment and consolidated operating results for the quarter, followed by an update on our near-term outlook. The Fluids Systems segment generated total revenues of $161 million for the first quarter of 2019, reflecting a 10% sequential decrease and a 9% year-over-year decrease. In the U.S., revenues were $103 million, down 3% sequentially on a 3% decrease in U.S. rig count. As Paul touched on, we’re seeing meaningful progress penetrating the deepwater Gulf of Mexico market which contributed a $4 million sequential revenue increase, benefiting from the startup of the Shell and Fieldwood projects. This improvement, however, was more than offset by market softness impacting U.S. land markets with Oklahoma showing the most significant decline. On a year-over-year basis, U.S. revenues have increased 11% from Q1 of 2018, modestly favorable to the 8% improvement in average rig count over the same period. In Canada, revenues were $13 million for the first quarter, reflecting a 12% sequential decline, largely reflecting a pullback from our Q4 market share gains as the market rig activity improved by 2% sequentially. On a year-over-year basis, Canada revenues declined by 43%, which compares to a 32% reduction in industry rig count. Although our market share is relatively in line with prior year, the first quarter of 2018 revenues benefited from significant levels of Fluids losses, which did not recur this year. Outside of North America, revenues from our international regions totaled $44 million in the first quarter, down $12 million from prior quarter levels. As discussed on our fourth quarter call, the sequential revenue decline is largely attributable to the transition to the new contract in Algeria and the conclusion of the Petrobras contract in Brazil which, combined, contributed $8 million of the…

Thanks, Gregg. In summary, while we were not satisfied with the Fluids margin in the first quarter, we also recognize that the majority of the transitory issues are now behind us. We continue to be encouraged by the improving commodity price outlook and the broad-based impact this is expected to have on activity levels both in North America and internationally. The latest award with Shell Oil in the deepwater Gulf of Mexico is yet another milestone for Newpark, demonstrating our ability to deliver value-added solutions in one of the most challenging drilling environments in the world. We intend to leverage that commercial and technical success with other IOCs operating in the Gulf of Mexico as we look forward to providing both drilling and completion fluids. In the near-term, in addition to the ongoing margin and capital efficiency improvement efforts, we remained focused on executing the key elements of our total fluid solution strategy. Last quarter, we highlighted that our deepwater completion fluids facility in Louisiana is fully operational. This is a key element of our broader strategy in the Gulf of Mexico, enabling us to now offer drilling and completion fluids, which not only expands the revenue potential in each project but also provides a value bundle that customers in the deepwater markets are seeking. While 2018 was the year to establish our presence in deepwater, 2019 is the year to build on our success, and as the first quarter demonstrated, we are off to a very good start. Another element of our total fluid solution strategy is the expansion into stimulation chemicals. In the first quarter, we completed a successful trial of our stimulation chemicals with a major operator in the U.S. land business, which we mentioned on the fourth quarter call. With the successful trial, we are finding…

Thank you. [Operator Instructions] Our first question comes from the line of Praveen Narra with Raymond James. Please proceed with your question.

Hi good morning guys. I guess if we could start on the Fluids side, obviously, it seems like international has some excess cost and but I wanted to focus on the U.S. side for a second. You mentioned that U.S. profitability improved sequentially. Would that profitability improvement due to the mix shift with the Gulf of Mexico work starting? And if or is there anything else going on there? If you could, can you talk about the discrepancy between the U.S. and international profitability for that business plan?

Sure. Sure. Praveen, this is Gregg. I’ll take that one. Yes, in terms of the profitability here in Q1, the big drag was the international work and the transition and dislocation that you have, which causes some inherent cost dislocation there. Within the U.S., we had been talking about our cost efforts that we had been taking really in the second half of 2018. And that’s where we’re starting to see the benefit of that as well as, as you point out, starting to see the benefit of that deepwater work picking up pace, and that’s providing some natural benefit to it. The other challenge that we had in the U.S. market was while the rig count was down fairly modestly, you look at that decline and it’s very concentrated in one area, in particular Oklahoma, and that’s a region that’s down 25%, 30% from the fourth quarter levels in terms of the market rig count. So that’s another area that caused a bit of a dislocation to us in the cost side.

Okay. That’s helpful. And then if we just touch on the mats, guidance for a second. You mentioned kind of coming you mentioned 1Q benefiting from a bitter mix in terms of some services versus rental sales. If we think about the 2Q guidance, is that change just the normalization of those? Or I guess how do we think about what the proper mix between those was and how 1Q compared to what you consider normalized?

Yes, Gregg again. In terms of the mix favorability that Paul had touched on, a little bit of that is intentional. We talked about specifically focusing on some of the areas of higher returns and therefore, pulling back on some of the service activities. But even within that, you also have some natural variation within your product sales and rental activities that change the profitability profile. And on that side, the quarter was a little bit stronger than it typically is, and we expect that will normalize a little bit more here in Q2. And that’s part of the story as to why we expect the margin profile to pull back a little bit from what the Q1 result was.

Okay, perfect. If I could squeeze one more in just on Brazil. In terms of Brazil, there was a contract to work with one of your peers. So, I guess I was curious on to how you think about the cost you guys are holding down there and just the outlook for that region.

Sure. Yes. As we roll off the Petrobras contract, we rightsized the organization down there but maintained an operational presence for the deepwater work. And as you know, we’ve done probably a majority of the deepwater drilling there with Petrobras in a lot of the IOCs. We see more opportunities there. Obviously, the Shell Oil contract award to one of our peers happened, but there’s a lot more opportunities out there for us as well.

Okay thank you very much guys.

Thank you. [Operator Instructions] Our next question comes from the line of Matt Dhane with Tieton Capital Management. Please proceed with your question.

Thank you. I was hoping you could discuss how you’re viewing the international opportunities today and put it maybe in reference to how they’re lining up compared to 6 months ago. That would be helpful.

Okay, sure. International opportunities versus 6 months ago, we certainly are seeing a lot of tender activity. I would say a lot of that is concentrated in the Middle East right now as a fairly strong area and a lot of tendering. We are seeing more tendering, I would say, also in the deepwater offshore Brazil market. Those seem to be the 2 stronger global regions. Gregg, anything that you could add?

Yes. I guess I would your question about how that frames up versus 6 months ago. As we’ve progressed through 2018 where we were seeing this continued strengthening in activity, the pullback in the commodity price at the end of ‘18 caused a lot of that to delay. There was, definitely some reservations from operators as we progressed in there to early ‘19. And now what we’re seeing is them begin to pick up pace and resume back to kind of how things were looking before that pullback.

And then on Shell, you won a new rig. And can you remind me, are you on 2 rigs now or is that the third rig that you are going to be on?

Yes, we are currently operating on 2 rigs and we expect the third rig to start in the quarter.

Yes. The 3 projects are in certain holdings.

That’s a pretty major move for our corporation, right, when you’re in one of the most challenging drilling environments in the world and going head to head with the largest integrated service companies. And really, it’s gotten down to the fact that our technology is truly differentiated and our service quality is at par or better. So, we’re very pleased with our traction in the Gulf of Mexico. And again, our hope there is to be able to leverage that with other IOCs operating there.

And I’d assume the other IOCs obviously have noticed what you’ve won with Shell. I mean have you seen conversations really pick up in tenor and seriousness here recently then?

Yes. I would say that the way the Gulf is structured the way it’s structured, a lot of the other IOCs are partners on those Shell wells, so they’re getting all the technical data as we speak and as we’re drilling. And I would say there’s been ongoing communication with all the major IOCs in the deepwater concerning our Kronos technology.

Congrats on the new Shell.

Great. Thank you.

Appreciate it.

Thank you. [Operator Instructions] We have completed our question-and-answer session. I will turn now turn the floor back to management for any final comments.

Alright. Thank you once again for joining us on the call and for your interest in Newpark Resources. We look forward to talking to you again after the next quarter.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.