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National Oilwell Varco Inc  (NOV -0.16%)
Q4 2018 Earnings Conference Call
Feb. 07, 2019, 11:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the National Oilwell Varco Fourth Quarter and Full Year 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Loren Singletary, Chief Investor and Industry Relations Officer. Sir you may begin.

Loren Singletary -- Chief Investor & Industry Relations Officer

Welcome everyone to National Oilwell Varco's Fourth Quarter and Full Year 2018 Earnings Conference Call. With me today are Clay Williams, our Chairman, President and Chief Executive Officer; and Jose Bayardo, our Senior Vice President and Chief Financial Officer.

Before we begin I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities laws. They involve risk and uncertainty and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in this quarter or later in the year. For a more detailed discussion of the major risk factors affecting our business, please refer to our latest forms 10-K and 10-Q filed with the Securities and Exchange Commission.

Our comments also include non-GAAP measures. Reconciliation to the nearest corresponding GAAP measures are in our earnings release, available on our website. '

On a U.S. GAAP basis, for the fourth quarter of 2018, NOV reported revenues of $2.4 billion and a net income of $12 million, or $0.03 per share. For

the full year 2018, NOV reported revenues of $8.45 billion and a net loss of $31 million or $0.08 per share. Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA as defined in our earnings release. Later in the call, we will host a question-and-answer session. Please limit yourself to one question and one follow-up to permit more participation.

Now let me turn the call over to Clay.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Thank you Loren. National Oilwell Varco delivered solid results for its fourth quarter 2018, as revenue increased 11% sequentially and 22% year-over-year, and EBITDA increased to $279 million or 11.6% of revenues. All three segments increased sales and EBITDA sequentially, due to strong operational execution during the quarter.

Revenues for the full year 2018 were $8.45 billion, a 16% improvement from the prior year. Full year EBITDA of $910 million improved 49% year-over-year and represents 26% leverage over 2017. During 2018, NOV continued its pivot toward unconventional shale technologies, while preserving and enhancing optionality in offshore and international markets. We continue to benefit from the cost reductions and efficiency improvements we put in place over the past few years and we remain vigilant with regards to continuing to manage costs closely. Before diving deeper into our fourth quarter results, I want to tackle the question that is on everybody's mind, the outlook for the coming year.

In a few minutes Jose will step you through our detailed outlook by segment, but to state the obvious here upfront, the outlook is significantly more opaque than it was just 90 days ago. Oil prices declined sharply through the fourth quarter before recovering modestly in recent weeks, aided by OPEC and Russia production curtailment announcements. In our view, stability at levels above $50 per barrel for WTI can help maintain oilfield activity near current levels in North America, or at least help minimize activity declines, while also continuing to incentivize the recovery in international and offshore markets. We believe this provides a plausible backdrop for a scenario where prospects and activity can brighten for NOV throughout the year, particularly if oil prices demonstrate an upward bias from here. However, we're managing to the reality that the lingering effects of WTI hitting a 17-month low in December will negatively impact our business, particularly in the first quarter.

Specifically, we saw some of our customers accelerate shipments of equipment near year-end, which means we benefited from revenues in the fourth quarter, which would have otherwise been recognized in the first quarter of 2019, despite lower oil prices trending into the mid-$40 range during the fourth quarter. This contributed to our strong Q4 results, but it means that we will face lower sales in the first quarter, which will also be impacted by the slowdown in ordering we saw late in the year, as our customers watched oil prices melt down and grew more cautious. We suspect some customers wanted to get equipment into their operations in advance of looming CapEx budget cuts for 2019 and want to report lower CapEx in 2019, which drove the acceleration.

As we look forward into 2019, candidly none of us know precisely yet the impact of the sharp oil price downturn. Having been through a few downturns, there's typically a three- or four-month lag before (technical difficulty) a meaningful response, but it inevitably moves directionally with oil prices. And as our oilfield service customers look to their E&P customers' spending plans for clues as what to invest in, in equipment sets their mood is very cautious as well.

Whatever the future holds, I'm confident that NOV will execute crisply and our fourth quarter results provide the latest example. Wellbore Technologies grew 4% sequentially with robust 54% incrementals. Within our Completion & Production Solutions segment, all but one of our business units posted sequential top line growth and we posted a book-to-bill above 1 for the segment. Rig Technologies strong finish to the year came from improved progress on offshore projects and a shipment of land rig packages for the U.S. and Argentina markets. Rigs performance was also helped by higher aftermarket revenues, as our customers desire to use their budgeted CapEx and OpEx at year-end led to more service calls to repair their equipment during the fourth quarter.

Let me now turn to a couple of key regions. Overall 42% of NOV's consolidated revenue during the fourth quarter came from North America, which grew 1% or $10 million sequentially. Our drill bits continued to gain share in West Texas, driven by superior performance and drilling motors posted a 60% year-over-year sales increase in the U. S., due to technical improvements in reliability and performance, which have enhanced NOV's reputation in this area, particularly among E&Ps. Motor performance has a lot to do with well success, as a premature motor failure can lead to a six-figure unplanned trip. Some downhole service providers, seeking to move old inventory and preserve cash, have been putting together motors and BHAs from old desperate parts out of their boneyards. Not surprisingly, these cobbled-together motors seemed to fail more frequently and in response several E&Ps have begun directly sourcing drilling motors from manufacturers, a trend which has clearly benefited NOV.

Our fourth quarter saw double-digit growth in drill pipe sales, as some customers pulled deliveries forward from their first quarter. North American customers were also noticing that our premium Delta drill pipe connection reduces their recut rate well below the industry average, reducing the cost of ownership for them. Delta now represents 25% of our drill pipe revenue mix. In addition, we just introduced a new connection for work streams that expands our reach into the adjacent market of workover operations.

While North America pressure pumping equipment demand has slowed considerably, no surprise, given a sharp pricing erosion witnessed by our customers, thankfully coiled tubing remains a different story. Our new high-capacity Genesis coiled tubing unit is seeing brisk demand, both domestically and overseas, due to its ability to access deeper wells and longer laterals. Additionally, demand for cementing equipment remained strong in North America, but wireline demand has leveled off through the first few weeks of 2019.

With respect to drilling equipment, we continued to witness steady demand for upgrade components, including high torque top drives, NOVOS control systems and DC to AC land rig conversions, as drilling contractors were eager to expand their service offerings in a highly utilized super-spec rig space, where day rates were strongest. We're approaching an installed base of 50 NOVOS rigs in North America with contractors and oil companies alike clearly recognizing the increased safety and efficiency of implementing process automation.

Our Completion Tools business posted another solid quarter of growth and profitability and we saw strong sequential growth for desanders and spherical sand traps, which are up to three-times more efficient than traditional designs for North American producers.

Turning to international markets. The recovery continued to unfold slowly. A quick reminder, our international revenue stream tends to be more project-driven and therefore lumpier than our North American businesses. The Middle East was once again a standout, posting solid double-digit sequential growth numbers on demand for products such as shaker screens, rig instrumentation packages and liner hangers, as well as rig equipment sales into Algeria and Kuwait. Our new world-class fiberglass pipe manufacturing facility is set to open in Dammam, Saudi Arabia on April 1, expanding our capabilities to serve the Middle East region.

In Latin America, NOV posted double-digit revenue growth sequentially in the fourth quarter, helped by strong shipments of flexible subsea pipe into Brazil. We continued to expand our presence in Vaca Muerta shale play in Argentina. During the quarter, we were awarded a contract to provide comprehensive wellsite services to a major IOC and shipped a new modern land rig into the region.

After a particularly deep downcycle over the past five years, the Asia Pacific region is starting to show signs of life, as substantial revenue improvements were driven by growth in the Chinese and Singapore markets. Additionally, the first installation of our offshore liner hanger system for a major operator in the region is another indication that our completion tool strategy is growing legs.

Finally, turning to the offshore. NOV saw very strong sequential performance as revenues increased 23% sequentially, driving our offshore mix to 37% of consolidated revenues, or about $888 million. Q4 saw excellent flexible subsea pipe sales in Brazil, as our customer pulled deliveries forward. Outside of Brazil, our subsea flexible pipe business is seeing intense competition for tenders for fast-track brownfield developments and tiebacks.

Our business that makes conductor pipe connections, the XL Systems, posted record high bookings with strong activity in support of the ramp-up in activity for offshore South America. However, conductor pipe orders have slowed in the first quarter, indicative of the uncertainty in the offshore marketplace. On previous calls, we stated our expectation for the offshore businesses within our Completion & Production Solutions segment to bottom in the second half of 2018. However, due to the accelerated deliveries we executed in the fourth quarter, the bottom may still be a quarter or two away.

In the offshore drilling space, activity around rig reactivations continues to build momentum. Driven by rising volume of tenders, the drilling contractors are readying their iron to go out and win. As we have returned to rigs that had not worked for some time and reflect upon what we've seen, here's what we've discovered. The longer a piece of steel sits in saltwater, the rustier it gets. Reactivations tend to become costlier and more complicated with time spent idle. Stack time drives up rig reactivation costs. Rig upgrade orders, which frequently go hand-in-hand with reactivation projects, have of late focused on increasing hoisting capacity, adding crown-mounted compensation and adding more sophisticated control systems like NOVOS. Some of these reactivations are driving demand for new drill pipe, which again helped our fourth quarter.

As I stated at the onset, we entered 2019 with more uncertainty than usual. A $20 drop in crude price during budgeting season is bound to take a toll on activity plans. When we ask our customers what they expect, the answer is we hear are all over the map, but the most consistent theme seems to be their fidelity to earning returns on the capital that they deploy. And here's where NOV shines, a relentless focus on innovating technologies and tools and delivering superior service and know-how, all with a singular objective of reducing our customers' cost of operations and cost per barrel positions NOV to enable our customers to maximize their capital returns. So we are cautious in the near term, keeping a close eye on cost while we continue to position the Company to be at the right place, the right time, with the right tools for the recovery.

To our employees who are listening around the globe, you put up a tremendous fourth quarter and a full year 2018. Keep up the great work. Your talent and dedication make NOV a world-class business and make me very, very proud. Jose, Loren and I appreciate all that you do.

Now I'll turn it over to Jose.

Jose Bayardo -- Senior Vice President and Chief Financial Officer

Thank you Clay. To recap the quarter, NOV consolidated revenue increased $244 million or 11% sequentially and EBITDA improved $34 million to $279 million, or 11.6% of sales. Operating profit was $87 million and we posted net income of $12 million or $0.03 per share. On a GAAP basis, our operating profit and net income included $21 million of pre-tax charges, primarily related to the closure of one of our facilities.

Looking at a couple of select items on the P&L. Other expense increased $9 million, mainly due to higher FX losses and like last quarter, we reported an outsized income tax expense, primarily a result of valuation allowances that prevent us from recognizing foreign tax credits. In our segment-level detail, higher inter-Company sales resulted in a $13 million sequential increase in revenue eliminations. The margin associated with higher inter-Company revenues and an increase in unallocated expenses resulted in a $23 million increase in eliminations and corporate costs. In the first quarter, we expect inter-Company sales as a percentage of pre-elimination revenues, to remain in line with Q4. Lower inter-Company revenues along with lower corporate costs, should reduce eliminations and corporate costs by roughly $10 million in the first quarter.

In the fourth quarter of 2018, cash flow from operations totaled $221 million. And after deducting $71 million in capital expenditures, we netted $150 million in free cash flow. NOV has always been focused on generating cash flow and returns, which is why we explained on last year's call that we were making a concerted effort to improve the management of our working capital. We exited 2018 with a revenue run rate that was 22% or $1.7 billion per year higher than our run rate at the end of 2017 and only added a total of $86 million to our working capital in 2018.

Our working capital as a percent of our revenue run rate decreased to 36.7% at the end of 2018, from 43.6% at the end of 2017. While we consider our efforts related to working capital in 2018 a large success, we still see opportunity for additional improvement. In 2019, we expect our capital expenditures to increase roughly $100 million to about 50% of our annual more depreciation and amortization expense, primarily due to construction of our new rig manufacturing facility in Saudi Arabia, which we'll use to execute on our $1.8 billion rig order. We've always prioritized investing in compelling organic investment opportunities and this project checks that box.

Let's turn to the results for our operations. Our Wellbore Technologies segment generated $884 million in revenue in the fourth quarter of 2018, an increase of $37 million or 4% sequentially. Solid sequential revenue increases in our WellSite Services, Grant Prideco and Tuboscope business units helped the segment meaningfully outpace industry activity levels, particularly in the U.S. where the segment posted 4.5% revenue growth against a 2% increase in the active rig count. A better mix of business and higher volumes drove very strong sequential EBITDA leverage of 54%, resulting in a $20 million increase in EBITDA to $155 million or 17.5% of sales.

In our WellSite Services business unit, we realized sequential revenue increases in all major product offerings in an almost all operating regions. Revenues increased 7% in the business unit's solid controls business, led by increased job counts in the U.S. and Latin America. We realized strong sequential increases in Colombia and Peru and successfully wrapped up a long-term project in Brazil.

Screen sales also improved in most regions with notable strength in Africa and Southeast Asia. The capital equipment sales portion of WellSite Services also realized strong growth, due to a sharp increase in shaker sales, which resulted from three consecutive quarters of improved bookings. Our Grant Prideco drill pipe business recorded third straight double-digit percent sequential increase in revenue and posted its fourth straight quarter of bookings in excess of $100 million.

Additionally, we are seeing sales of Delta into international markets increase, demonstrating broad application and demand for this high-performance premium drill pipe connection that delivers faster connection times and lower total cost of ownership. We are encouraged by the growing adoption of Delta and are equally encouraged by a sharp increase in offshore bookings, accounting for almost a third of our order book in Q4. This was the first meaningful uptick we've seen in offshore orders for drill pipes since 2015, an indication that certain inventories of pipe for offshore markets are drawing down to unsustainable levels.

Notwithstanding the strong Q4 performance and solid bookings, near-term challenges remain in our drill pipe business. Oil (ph) companies and operators exhausted capital expenditure budgets at the end of 2018 and appeared to be heading into the new year with some trepidation as a result of lower oil prices. So despite what we believe are meaningful improvements in underlying drill pipe market fundamentals, we have already had a number of customer requests to defer first quarter deliveries of new drill pipe for the North American marketplace.

Our Tuboscope business realized another solid quarter on strength from our coating operations, where we achieved double-digit percent sequential revenue increases in our U. S. and Eastern Hemisphere coating operations. Tuboscope's inspection services saw a slight decrease in revenues on lower volumes from U.S. steel mills and outside processors and from lower sleeve sales in Europe. In our downhole business unit, we saw a small sequential decrease in revenues during the fourth quarter. Notwithstanding the recent year-end softness, we've seen a remarkable growth in demand for our drilling motors, reflecting market share gains, enabled by our technology leadership and products such as our Series 50 and ERT motors and power sections. A large independent operator recently drilled its fastest intermediate section in a zone where temperatures exceeded 300 degrees Fahrenheit using a NOV 8.25 inch ERT motor. The operator was able to drill 13,800 feet in 223 hours, setting records for both time and interval length in this field, while also achieving a 19% reduction in cost.

Another promising new technology in our downhole business unit is our SelectShift downhole adjustable motor. This tool offers the ability to adjust the motor bend setting while the tool is in the wellbore, saving money by eliminating trips, improving rate of penetration and reducing torch velocity. We began testing this tool in the second quarter of 2018 and have now logged over 700 hours on the tool, drilled over 57,000 feet and completed more than 150 downhole shifts. Based on the success, we began to build out our fleet of commercial tools.

Our ReedHycalog business unit also realized a small sequential decrease in revenues during the fourth quarter in the Eastern Hemisphere, due to bulk sales in the MENA region, which occurred in Q3, but did not repeat in Q4. This falloff was partially offset by solid improvements in the Western Hemisphere. ReedHycalog's downhole measurement and steerable technology businesses realized sequential improvements led by increased demand from the Eastern Hemisphere.

Lastly, work on land-based North American drilling optimization project slowed as we prepared for major ramp-ups in automation and optimization work for Equinor in the North Sea, having signed an agreement with them to outfit their global drilling fleet with IntelliServ wired drill pipe. Interest in wired drill pipe continues to grow as more customers recognize the performance and safety improvements made possible by control systems and applications that can harness real-time broadband data transmission from along the drill string and the BHA.

As Clay mentioned, outlook is opaque at best. But in the first quarter of 2019, we expect to see slightly lower activity levels in the U.S., a slightly slower than normal start to the year in the Eastern Hemisphere and fewer deliveries of drill pipe and capital equipment. If this scenario plays out, we would expect revenues for our Wellbore Technologies segment to fall between 5% to 10% with decremental margins in the 40% range.

Our Completion & Production Solutions segment generated $788 million in revenues during the fourth quarter of 2018, an increase of $53 million or 7%. All business units reported sequential top line growth except for Fiber Glass Systems, which suffered raw material supply shortages that we spoke about on our last call. Holiday slowdowns and the raw material issues impacted manufacturing plant absorption, limiting sequential EBITDA leverage to 25% and resulted in a $13 million sequential increase in EBITDA to $112 million or 14.2% of sales. Bookings of $470 million increased $98 million or 26% sequentially and exceeded shipments of $456 million, resulting in a 103% book-to-bill for the fourth quarter, led by XL Systems. Total segment backlog at year end was $894 million.

Our Intervention and Stimulation Equipment business unit realized a 3% sequential increase in revenues. Despite the fall-off in completion-related activity and resulting follow-on demand for pressure pumping equipment, global bookings for our coiled tubing equipment remains strong. NOV's technology leadership in all things coiled tubing, makes us the go-to supplier as the industry continues to push the limits on extended reach lateral well completions. Even as the market leader, we never sit still. In the fourth quarter, we delivered our first Genesis coiled tubing unit, which is designed to carry the largest tubing load possible from a single trailer unit.

Additionally, we will begin deliveries of our new HR 6120 injector head, which combines the ability to handle higher strength, heavy wall coiled tubing with increased pull and snub capacity, all in a platform that's smaller and weighs less than our legacy units. Our QT-1400 is the highest tensile strength coiled tubing on the market. And as highlighted in our press release, we recently introduced our TRUE-TAPER XR string design. The string's improved weight distribution enables users to place more weight in vertical sections of the well and less weight in lateral sections, extending the limits for which coiled tubing can be used in extended reach applications. One customer recently used TRUE-TAPER XR to reach TD on several wells that were each over four miles in measured depth and had 1- to 2-mile long laterals. This application was not possible with other string designs.

Even with extremely limited orders for pressure pumping equipment, the business unit delivered a sequential increase in revenue and a 112% book-to-bill in Q4. However, we expect a rapidly contracting pressure pumping equipment backlog, softening demand for wireline equipment and constraints on how quickly we can execute on our large coiled tubing equipment backlog to result in a fairly sharp fall-off in this business unit's revenue during the first quarter.

Our Completion Tools business unit posted another quarter of double-digit percentage growth. While still a relatively small business for NOV, 2018 revenues almost doubled from 2017, primarily from organic initiatives as this business unit's last acquisition was completed in early 2017.

Even in a slowing North American completions market, this operation continued its rapid growth by taking market share in the U.S. and continuing to leverage NOV's platform to push its product offering into additional markets. There were several examples of this in the fourth quarter, including our first sales of burst port systems in Saudi Arabia, subsurface safety valves in Russia and liner hangers in Bahrain, Iraq and offshore China.

Our Fiber Glass Systems business unit's revenues declined roughly 15% sequentially, in line with the expectations we set during our Q3 conference call. As a reminder, our primary supplier of a critical resin used to make our flexible pipe experienced a major plant failure, leading to a global shortage of the resin. The supplier's plant is now back online, but stocks of the resin remain low, which will continue to constrain Fiberspar's production, albeit not nearly to the same extent as in Q4.

Additionally, while the quarter played out as anticipated from a P&L perspective, bookings came in lighter than we hoped. Order intake fell sharply in December and remains low for North America, as cautiousness has crept into infrastructure-related capital projects, but orders for international markets appear to be improving. Unfortunately, due to soft demand in the U.S. and certain international orders that we expected in late Q4 now expected in mid- to late Q1, we anticipate our Fiber Glass Systems business unit will see another sequential decrease in the first quarter. While the business unit's traditional offshore market has not yet recovered, we are focused on other emerging opportunities, including a fairly large potential market resulting from IMO 2020, which requires ships use marine fuels will sulfur content of no more than 0.5% or install exhaust gas cleaning scrubbers on their vessels by January 1, 2020.

Analysts expect it will be more economic for larger vessels, those with over 80,000 deadweight tonnage that are under 15 years old to install scrubbers, rather than switch to low sulfur fuels. There're roughly 25,000 existing vessels in this category. Scrubber systems are manufactured by folks such as Alfa Laval, Motzilla (ph) and others, but are typically housed in composite towers and gases are poured in, in and out of the scrubber's tower via a corrosion resistant composite tubulars. As you might imagine, ship engine rooms are low on space and retrofitting a scrubber system will require a complex, highly customized solution. Based on recent experience, complete system installations average roughly $5 million with NOV's opportunity ranging from $80,000 to $250,000 depending on the vessel. Fiber Glass Systems is the leading provider of composite materials to the energy industry and has a long history of providing and installing piping systems for marine vessels and shipyards, which means we are well-positioned to support our customers in their efforts to comply with IMO 2020.

Our Process and Flow Technologies business unit realized solid top line growth, but with little flow through to the bottom line, as a result of less favorable product mix. In the unit's midstream business, revenues declined slightly in North America from lower demand for reciprocating pumps, chokes and/or artificial lift, red iron equipment. The falloff in North America was more than offset by the Eastern Hemispheres, which realized strong demand for pump packages in Africa and Asia.

In our Wellstream Processing business, revenue from North America increased as we continue to expand the customer base for our spherical sand trap solution. We also realized a meaningful increase in revenues as we completed several large projects in our legacy offshore production and processing business. While tendering activity remains high, awards continue to push. And with the aforementioned completion of several large projects, we expect a sequential decline for this operation and the business unit as a whole.

Revenues for our flexible subsea pipe business unit recovered nicely after a challenging Q3. As Clay mentioned, customer deferred deliveries from Q3 shipped in Q4 and certain orders we didn't expect to ship until Q1, were accelerated into Q4 by customers eager to exhaust 2018 capital budgets. This pull forward was good news for Q4, but will cannibalize first quarter results. Further compounding this challenge in Q1, our orders we anticipated receiving in Q4 that were deferred and are now expected in late Q1. The net effect will be a sharp sequential revenue decline in the first quarter. Consequently, we now anticipate that our primary offshore business unit in this segment will not hit bottom until sometime in the first half of 2019.

Not all news related to the offshore markets is bad. As clay mentioned, our XL Systems conductor pipe connector business unit had an exceptional quarter, delivering strong sequential growth and incremental margins. The unit also posted its sixth straight quarter with a book-to-bill in excess of 1 and achieved an all-time high backlog at year end. Looking at the first quarter of 2019, we expect revenues on our Completion & Production Solutions segment to decline roughly 15% with decrementals in the 30% range.

Our Rig Technology segment generated $804 million in revenues during the fourth quarter of 2018, an increase of $167 million or 26% from the prior quarter. Revenues from capital equipment sales were up almost 50%, due to better-than-anticipated progress on projects and two land rig deliveries. Additionally, certain customers became eager to receive equipment prior to year end. And thanks to the segment's strong execution, we were able to fulfill those requests. Yes, this is the same good news bad news story you just heard in my remarks related to our Completion & Production Solutions segment.

Aftermarket revenue increased by approximately 5%, due to traditional pickup in fourth quarter service and repair work and due to spare part orders which increased in each of the fourth quarters leading up to Q4. EBITDA increased $24 million sequentially to $102 million or 12.7% of sales. EBITDA flow-through was limited to 14%, which was in line with expectations, primarily due to a lower margin product mix.

Bookings of $119 million were the lightest we have seen all year. The low level of order intake is due in part to the uncertainty that a sharp drop in oil price injects into customers' future plans. However, as we've mentioned in the past, we expect orders and financial results to be lumpy, while this segment scrapes along near its cyclical bottom. Total segment backlog at year end stood at $3.1 billion.

In North America, our drilling contractor customers became cautious as we entered 2019. They're concerned about a potential decrease in E&P company capital expenditures and the likelihood that 2019 budgets will be more heavily weighted toward completion operations to stem the growth in drilled but uncompleted wells. Even though the market is bracing for a pullback in drilling activity, Tier 1 AC super-spec rigs remain in short supply and day rates remain strong. As a result, inquiries for newbuild rigs in North America have slowed, but customer inquiries related to upgrades remain robust. Contractors can obtain relatively fast paybacks for upgrades and more importantly, keep more of their fleet working. Due to a generational gap in rig technologies found overseas, economics associated with international land upgrades are not the same as in North America, creating more demand for future newbuild rigs.

While the pace of progress can be uneven in international markets due to NOC tenders that tend to push to the right, a growing number of international customers understand the value associated with NOV's latest land rig technologies. We believe our 50 rig commitment from Saudi Aramco will serve as a solid baseload of activity to help manage the choppy nature associated with this business. And we're excited about breaking ground on our new rig manufacturing facility in Saudi Arabia this quarter.

Lastly, we still see limited offshore newbuild opportunities outside of certain niche applications, including 20,000-psi capable rigs, but remain optimistic regarding potential reactivations and associated upgrades as it certainly isn't getting easier or cheaper to reactivate a rig as time elapses.

While we are seeing improving fundamentals and more recently, customer inquiries that give us optimism regarding the future prospects for our Rig Technologies segment, near term this business remains challenged due to the wind down of offshore projects and customers that are still capital constrained. As such, for the first quarter of 2019 we expect revenues to fall 16% to 17% with decremental margins between 25% and 30%.

In summary, the dedicated employees of NOV executed extremely well and delivered solid results in 2018 by continuing to develop, deliver and support the technology and equipment on which our customers are aligned. We are working through what will be a tough start to 2019, but we are optimistic that the recovery could resume later this year and our people have positioned the organization well for any market environment.

We'll now open the call to questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question will come from the line of Marshall Adkins with Raymond James. Your line is open.

Marshall Adkins -- Raymond James -- Analyst

Good morning guys. Thank you for all the detail as usual. I want to ask about the trends in U.S. versus the international/offshore. It seems like last five years you've been -- had a concerted effort to increase levers in the U.S., your shale, the growing area. But it seems like now we're starting to see a resurgence in international. You mentioned stuff in Saudi Arabia, in the Middle East and other areas that started to pick up, plus the offshore side is picking up. So looking at it over the next several years, not the next quarter but the next couple of years, is it fair to assume that this trend we're seeing back to North America in the last five years maybe starts to moderate and we see more of a balanced growth going forward? Just comment on kind of U.S. versus international and offshore.

Clay C. Williams -- Chairman, President and Chief Executive Officer

I actually kind of hope so, because that means that internationally we're seeing a more robust recovery. And you characterized it accurately Marshall. We did initially pivot toward unconventional shale technologies, which thus far have been mostly focused on North America. But importantly, we did that without sacrificing optionality into international markets or offshore markets. And so I view this as additive to a portfolio of businesses that we carried into the downturn. What's interesting to me is, and this has happened with prior technological evolutions in the industry going back decades that things were kind of figured out here in North America and then they're applied overseas.

And so what's encouraging to me is that some of these investments that we've made around horizontal drilling, around pressure pumping and fracture stimulation of these wells, which kind of drive unconventional shale production are being applied in more international markets and in particular, Argentina. It's really gaining traction. You've got a couple of major oil companies and several independents that are very intently focused on developing that resource base down there. Elsewhere, you get the Bowland shale in the U.K. You've got a new shale -- gas play in Abu Dhabi. The Saudis are focused on gas production out of shales. Lots of places around the world I think are going to see application of this technology.

And so it's not hard for me to see NOV providing these technologies to these sort of blossoming regions and seeing more unconventional shale technologies applied elsewhere. In the meantime, North America is going to continue to be cyclical. The oil and gas operators here are very responsive to commodity price changes. And so, yes, we're seeing definitely a slowdown. But if you look back at pressure pumping for instance over the past 15 years or so, it has going through a number of cycles. The good news for an equipment provider into that space is the basic operations of pumping high-pressure, high-volume abrasive prompet (ph) through all these equipment is that industry tends to eat a lot of it. So supply demand I think kind of corrects itself over time.

Marshall Adkins -- Raymond James -- Analyst

One quick follow-up here. Let's talk Middle East and Saudi in particular, to the shift to more international. I know the Nabors JV, they're going to be building a lot stuff that you guys will be heavily involved in. Update us on the jackup stuff and what to you expect to see there to the extent that you can, and/ or any other initiatives in the Middle East that you'd like to comment on?

Clay C. Williams -- Chairman, President and Chief Executive Officer

You bet. So with respect to that we announced a joint venture with Aramco last year to build land rigs. And that's built on a cornerstone order of 50 land rigs, $1.8 billion, the largest rig order that's ever been placed in the history of the industry. So we're pretty excited about that. That facility, which we're breaking ground on here currently will have the capacity to make equipment, to also go into offshore rigs Aramco also has a joint venture with Rowan and has announced plans to build 20 jackups. And so we're working closely on that program. That is not -- there's not been determined yet, all the equipment for those 20 jackups, but we're working hard to support that program as well. Additionally, this joint venture is set up to provide equipment around the region and to support the growing rig fleet around the region. So really excited about the partnership there with Aramco and the prospects ahead.

The Middle East has been a region that through the downturn since 2014 has held spending and investment activity at relatively high levels. And so it's garnered a lot more focus from NOV through the past five years. And pleased to say we're in really good shape there in support of our customers throughout the region. In my prepared remarks I referenced a new fiberglass plant that we're going to have a grand opening on in April. And we've got some other facilities going into the kingdom as well.

Marshall Adkins -- Raymond James -- Analyst

Thanks.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Alright, thank you.

Operator

Thank you. And our next question comes from the line of Byron Pope with Tudor Pickering Holt.

Byron Pope -- Tudor, Pickering, Holt -- Analyst

Morning guys.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Morning Byron.

Byron Pope -- Tudor, Pickering, Holt -- Analyst

Realized there's tons of uncertainty -- near-term uncertainty with regard to North America. I guess, Clay, I thought about the potential impact on orders near term impacting more your OFS customers, but it sounds like it's also crept into the mind set of E&P operators. Could you just remind us in terms of your exposure to E&P operators directly? My sense is that that exposure is more skewed toward caps. But I know you're starting to sell motors and other things directly to E&Ps as well. So just frame that for us please.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Yes. Generally it's about 30%. I don't have the precise number in front of me Byron, but it's been running about 30% of our revenue mix to oil and gas operators globally and about 70% are oilfield service companies that we outfit with equipment to execute the well construction plans for the E&P companies.

Byron Pope -- Tudor, Pickering, Holt -- Analyst

Okay. And then on the international side. Just following on to what Marshall was asking about. I guess I have a specific question about Wellbore Technologies. It seems like you'll have already started to make some inroads in terms of being the enabler to some of these independent companies. Could you just speak to, as you think about the outlook for 2019, the opportunities you see there to continue to progress that part of the NOV strategy?

Clay C. Williams -- Chairman, President and Chief Executive Officer

Yes. We're seeing -- we sell equipment and technologies really to all of the service companies and most -- in fact we're the leading provider of most of the equipment into most of the various service verticals that characterize the industry. And what we see in the North American market is, mostly these are fairly fragmented and competitive with respect to individual services provided. You go overseas and I think there's opportunities for smaller organizations to hang out a shingle and provide various services. So in a lot of ways our business plan is kind of the enabler of some of those organizations to get going on providing services. And what we feel like we're tapping into is a real hunger out there that a lot of the oil companies have with respect to having more options around service providers in oilfield services. And our mission is to outfit those smaller companies with the latest and greatest technologies to make them competitive and to really bring higher levels of capability to their organizations. And so we provide the equipment, we provide training, we provide aftermarket support of those operations, we're really there to make them successful.

Byron Pope -- Tudor, Pickering, Holt -- Analyst

Thanks Clay. Appreciate it.

Clay C. Williams -- Chairman, President and Chief Executive Officer

You bet. Thank you.

Operator

Thank you., Our next question comes from the line of James Wicklund with Credit Suisse. Your line is open.

James Wicklund -- Credit Suisse -- Analyst

Good morning guys. Good Q4 but the guidance on Q1 looks to be well below consensus. And so I think that's what taking the stock down. The improvement that you expect to see, hope to see, plan to see in the second half of the year, how much of that is based on expectations of oil price? And how much of that is based on real conversations with customers that we have confidence in?

Clay C. Williams -- Chairman, President and Chief Executive Officer

Well there's two pieces to it Jim. I think if oil will, let's say, stay here. And this is a think and maybe a little bit of a hope. But if oil will stay here in the mid-$50 range, I think there is sort of building pressure among the larger companies to go ahead and FID some more projects. I do think you're going to see international markets creep closer to recovery. And so that will help the second half of 2019. That's our hope. If oil prices go higher, I think that could lead North American independents to getting back to work in a more meaningful way and then would be additive with respect to the second half of 2019.

James Wicklund -- Credit Suisse -- Analyst

Okay. And my follow-up if I could. I realized the fallacies of Bloomberg's calculations and all. But you've seen a big shift in the expectation of and valuation of E&P companies in terms of generating returns of capital and generating returns on capital. You guys do a very good job of returning capital to shareholders. But in terms of generating returns above your cost of capital, as a manufacturing company, what will it take over the next couple of years to change the trend of the last seven, eight years, where you're not earning your cost of capital and we hit an absorption level, on an activity level or whatever has to happen for those returns to be positive?

Clay C. Williams -- Chairman, President and Chief Executive Officer

That's a great question Jim. And I'm going to answer it in some detail if you don't mind, because I do think it's very important.

James Wicklund -- Credit Suisse -- Analyst

No please. Please, please.

Clay C. Williams -- Chairman, President and Chief Executive Officer

The short answer is, as a manufacturing company, we need to bring great equipment to the oilfield service industry, which has the important role of constructing and developing wells on behalf of oil and gas companies. So we're always focused on new and better and more efficient equipment that's safer and reduces the cost of development. And that's the path to more prosperity. But in a broader sense thinking about returns on capital in this space, I would stress this is really nothing new to us. I go back 20, 25 years ago before there was an NOV. And I used to cover us at Tuboscope and Varco. And we observed back then that manufacturing equipment for the oilfield was a low capital intensity undertaking. So the investments in rig-up yards and in plants and machine shops was small relative to the revenues and profits that those assets could generate, which is in kind of stark contrast to the rest of the oilfield ecosystem. So oilfield service companies tend to be very capital-intensive, as do E&P companies.

So the basic design of NOV around manufacturing equipment comes out of this recognition that since it's low capital intensity undertaking, we get to keep more EBITDA for our shareholders and have to reinvest less. And we I think did a great job of that. So as we entered a period of prosperity and a massive sort of buildout, in particularly the offshore, generated strong returns on capital. That obviously all changed in 2014 when we entered sort of this generational down cycle. And so -- and I would add, throughout that entire period though, to put it in perspective, our CapEx levels have been pretty light. So 2018, for example, 2.9% of revenue in CapEx, $244 million. We've always been kind of in the 2%, 3%, 4% range, much lower than everybody else in the space.

For 2014, as we -- the things became more challenged from a return on capital standpoint, we put in place an economic value-add type compensation system to get our team more focused on capital returns, to drive us back toward earning our cost of capital and have had that in place since 2015. Didn't make as much progress as we would have liked. So in 2017, Jose actually really started breaking this apart and focusing on our -- frankly our not very good job managing working capital here. So in this past year we've layered in another driver of incentive compensation around working capital. And as you just heard a moment ago, made good progress on that in the year that we just wrapped up. We drove working capital as a percent of revenue, annual revenue, from 44% down to 37%. Good progress, but aways to go.

Internally we tend to focus on returns on tangible capital, which is a combination of PP&E and working capital by business unit. And have made good progress there, particularly in 2018. So it's kind of going in the right direction. But we'll acknowledge we have a long way to go. What I would tell you is to me the most important thing -- obviously good processes to drive incremental returns, incremental investments need to be careful and cautious, but the main driver of returns on capital for not just this business, not just this industry, but all industries, really comes out of strategic positioning, which is why we spent so much time on our Analyst Day talking about what I think is the very thoughtful strategic positioning of NOV. Our role in the ecosystem, how we provide capital and tools to oilfield service companies and more importantly, the competitive advantages that come out of that. I think we had nine competitive advantages and attributes that are characteristics of our positioning strategically, all designed to drive returns on capital.

So overall to me that's the purpose of business, to deploy risk capital to earn a return by providing a high-value product or service to customers that they pay for and then managing it smartly through that. We've got some cyclical challenges here, but very focused on improvement in that area.

James Wicklund -- Credit Suisse -- Analyst

Clay that's very helpful, and I appreciate the detail very much. Thank you.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Thank you Jim.

Operator

Thank you. Our next question comes from the line of Chase Mulvehill with Bank of America Merrill Lynch. Your line is open.

Chase Mulvehill -- Bank of America Merrill Lynch. -- Analyst

Hey, good morning. I guess the first one, I guess I'll kind of come back to some of the targets that you gave at the Analyst Day and realizing that that was in a different oil price environment. But maybe if we can just kind of talk about the top line and expectations relative to kind of what you gave at the Analyst Day. If we step through each of your segments, maybe you could give us some outlook of kind of overall, whether you expect revenue kind of up or down across each segment for 2019?

Jose Bayardo -- Senior Vice President and Chief Financial Officer

Yes Chase, it's Jose. I'll start off on that. First of all, as you correctly pointed out, when we had our Analyst Day presentation we were in a pretty different environment. Back at the time WTI was pushing $65 a barrel. And in our presentation we layered in some very specific assumptions that were sort of the basis for the forecast in the overall outlook that we provided during that presentation. I think it included WTI in excess of $65 a barrel. Global CapEx spend increasing by at least 10% and a number of other assumptions, which obviously at this point after we saw oil prices collapse at the back end of the year from that sort of $65 price, down to the lower 40s appear to be somewhat off the table.

So as we look forward in time, as we mentioned, a number of times in our prepared remarks the overall outlook is very opaque right now. We give very clear guidance as it pertains to Q1 and are not prepared to sort of update full year guidance at this point. But think there -- the rest of the year, just depending on how the market shakes out, we could see a pretty decent recovery in the back half of the year as it relates to a question that Clay addressed earlier in terms of our split, in terms of where our revenue comes from between service companies and E&Ps, presents a little bit of an additional challenge in terms of trying of pin down exactly where the market is headed, because first of all, we're getting the vast majority of our outlook based on what our customers are telling us on the service side of the business, while they're still trying to hunt down what their customers are going to do. So probably in a little bit more time before we can provide you with a lot more precision related to the 2019 full year outlook. So that's kind of where we are right now.

Chase Mulvehill -- Bank of America Merrill Lynch. -- Analyst

Okay. Alrighty. I appreciate that. And then if we think about capital allocation and we get to the back half of the year and into 2020 things look a little better. How should we think about capital allocation, kind of split between dividend, buybacks, debt paydown or potentially M&A?

Clay C. Williams -- Chairman, President and Chief Executive Officer

Chase, so as far as capital allocation priorities, I'll also refer back to our Analyst Day presentation where I think we were pretty specific in terms of what our hierarchy is related to capital allocation. So nothing has changed on that front. Still first and foremost is our efforts to make sure that we have sort of the ideally optimized balance sheet structure. Next is investments in high return organic capital opportunities. Then we also look at compelling M&A and then a little further on down that list is return of capital to our shareholders.

And so, as I think you're aware, the Board authorized a $500 million share buyback program at the time of our Analyst Day. We set out some pretty specific criteria in terms of what kind of debt metrics that we did see before we really started leaning into that program. And that's -- as I mentioned nothing has really changed on that front.

Jose Bayardo -- Senior Vice President and Chief Financial Officer

Yes. Critically important we maintain investment grade rating. That's very important to our business model.

Chase Mulvehill -- Bank of America Merrill Lynch. -- Analyst

Got it. Alrighty. Thanks Clay, thanks Jose.

Jose Bayardo -- Senior Vice President and Chief Financial Officer

Thanks Chase.

Operator

And our next question comes from the line of Jud Bailey with Wells Fargo. Your line is open.

Jud Bailey -- Wells Fargo -- Analyst

Thanks. Good morning guys. Appreciate the commentary around expectations regarding activity levels and kind orders. But I wonder, focusing on the Wellbore Technologies segment, can you given any commentary on what you're seeing on the pricing front? Have you seen any weakness in pricing across any of the business lines? Or is it all pretty much activity-driven at this point?

Clay C. Williams -- Chairman, President and Chief Executive Officer

Yes. I would say Jud, first of all, we came into the quarter targeting pricing improvements to overcome some steel cost challenges and some labor cost challenges that we were facing. The tariffs went in place in the second quarter. The third quarter we really kind of felt that. Q4, we were focused on trying to get pricing to go the other way. What I'll tell you is that oil prices have not been helpful, making that happen. And so through the fourth quarter we did gain some ground in a couple of product lines. But I would say others are definitely starting to feel more price competition out there. And we're certainly hearing that from our oilfield service customers as well. So they're starting to feel the pinch and we've all seen the rig count roll over a bit. So I think we're starting to see more price pressure emerge.

Jud Bailey -- Wells Fargo -- Analyst

Okay. All right. I appreciate that. And then circling back a little bit on Chase's question. May be for Jose, I wanted to ask about the C&P and thinking about orders just for this year. There's a lot of moving pieces between what's going on with flexibles and ISE and then probably the delay of offshore orders. How do we think -- is there a scenario where orders year-over-year can stay flat? Would it take a big increase in kind of offshore-related orders in the back half of the year to pull that off? Or -- I'm just trying to gauge the magnitude of weakness in ISE and maybe flexible pipe versus the potential for that to maybe offset in the back half of the year by maybe some bigger, chunkier subsea or offshore-related orders. If you could help us maybe think about that big picture it would be great.

Jose Bayardo -- Senior Vice President and Chief Financial Officer

Sure. That's a good question Jud, which has a lot of complex moving parts and pieces to it. So obviously even in a very challenging market environment, in Q4 we still booked 100%-plus book-to-bill for the segment, and -- our ISE group, which is the huge increase in demand that we've seen from a lot of our coiled tubing, coiled tubing-related equipment, had really strong bookings during the quarter. We just talked about very strong bookings for certain offshore components, specifically our conductor pipe connection business. So there's a lot of different avenues for NOV to sort of build its book of business as we move forward during the course of the year. And one of the things we pride ourselves on is position ourselves in the marketplace to capitalize on whatever market opportunity that we face.

But we also talked about in our prepared comments that we're sort of deferring our position in terms of when we think the offshore components of that business will bottom. And to some extent that was a result of a little bit of a pull-forward in some of those areas that we saw in Q4 that are going to more adversely impact the first half of the year, but also just the timing as it relates to some of the opportunities that we have been chasing pretty aggressively.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Yes. We referenced within rig, shifting segments a lot of rig reactivations and sort of this greenshoots that are popping up that are reflective of oil companies tendering activity inching up. And then on the production side within C&P, again we're continuing to pursue projects that were very helpful that once we get into the second half of 2019, maybe even earlier and hopefully earlier, we'll see more FIDs around these. So specific opportunities in the North Sea, West of Shetlands, Caspian region, offshore Brazil, even offshore West Africa, which has been particularly hit hard through the downturn, a couple of projects that appeared to be (inaudible). So we don't -- we're not yet seeing a lot of the purchase orders flow on those just yet, but again remain hopeful that those oil companies are going to move forward and sanction those projects.

Jud Bailey -- Wells Fargo -- Analyst

Okay. Alright, appreciate the color guys. I'll turn it back.

Operator

Thank you. And our next question comes from the line of Edward Muztafago with Societe Generale.

Edward Muztafago -- Societe Generale -- Analyst

Hey guys. I was wondering if you could perhaps talk a little bit about sort of your thought process on the uptake of downhole drilling automation or just drilling automation technologies. A couple other drillers have sort of said that they see the uptake as being somewhat slower, below expectations. But one at least likened it to what we saw with the kind of hockey stick change in the uptake of AC technology. Certainly if you look at AI, (inaudible) some of the survey suggests maybe doubling or tripling of the uptake of this over the next five years. Can you sort of opine a little bit as to how you see the evolution of that playing out? Clearly you guys have focused your efforts there a lot and then maybe even could you give us an idea as to what percent of your portfolio today might be focused on just those areas in general?

Clay C. Williams -- Chairman, President and Chief Executive Officer

Yes. Well, to start having introduced new technologies in the oilfield and witnessed new technology introduction in the oilfield over many years, I would tell you it's not a space that bear hugs, embraces new things, because our customers do tend to be risk-averse. But nothing succeeds like success. And so ultimately you do have the adoption of things like MWD technology, rotary steerables, diamond bits, things like that that do kind of -- once they do get proven in the oilfield and people kind of understand the risk and the value proposition, then they can sweep pretty quickly. So I guess I think internally we're realistic about the speed of the uptake. With respect to the specific technologies that we're working on, as you know, we've got lots of them. Drilling automation is one. But very pleased to see, for instance, Equinor announce their intention to put wired drill pipe on their offshore drilling programs in a big way to enhance efficiency on those operations, to enhance safety on those operations. And several other oil companies as well, really putting this technology to work. It's now -- at this point it's field ready. It's a very, very impactful is sort of technology that's driving gains and efficiency in addressing specific downhole problems that we're excited about.

We're also -- in our press release we referenced our SelectShift tool, which is a really unique way of drilling horizontally. And still -- I mean we're now accumulating runs and experienced with that. And it has since -- I think we have a good chance here of having that be a very impactful technology, which will see greater adoption in the future. We made investments in MWD to enhance geosteering. We've made investments in rotary steerables. We've got three different platforms of that, that are all making progress.

So it does take time, it takes a lot of patience to get a technology to go in the space, but there's lots of examples you can point to in the past where those that are patient and persistent do in fact win. They do in fact arrive in a place where they're providing transformative sort of technologies. And that's how this industry moves forward. So I really am very proud of the steps and the progress that NOV has made to be an innovator on behalf of our customers. And I think all these sort of new technologies around digital, around machine learning, around automation are going to continue to be transformative in the oilfield.

Edward Muztafago -- Societe Generale -- Analyst

Okay. I appreciate that and I'm glad that you're supplying a lot of that to all of the service companies. Maybe if we could just hone down on wellbore really quick. Clearly appreciate there's a bit of a backing here in the first quarter with the push out of drill pipe and pull forward of some orders. But we're also hearing that there is growing interest with the recovery in commodity price and recontracting rigs. Would you be willing to call the bottom in wellbore in first quarter? Or do you not feel like we're quite at that point yet?

Clay C. Williams -- Chairman, President and Chief Executive Officer

I'm looking at Jose.

Jose Bayardo -- Senior Vice President and Chief Financial Officer

I think Clay has said very well in his prepared remarks, where typically there's a sort of three or four month lead lag time in terms of how activity responds to commodity prices. It does feel like maybe that could be a little bit quicker and things might be a little bit shallower. But as we've said a number of times, there's just a significant lack of clarity in terms of how budgets ultimately get set and how this year plays out. So not going to say it's out of the question, but we're also not going to commit ourselves to anything like that.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Yes. Hope spring is eternal for the back half of the year.

Edward Muztafago -- Societe Generale -- Analyst

Okay. I appreciate that guys. Thank you very much.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Thanks Ed. Thank you.

Operator

Thank you. And this concludes today's question-and-answer session. I would now like to turn the call back to Mr. Clay Williams, Chief Executive Officer, for closing remarks.

Clay C. Williams -- Chairman, President and Chief Executive Officer

Thank you Chelsea. So to recap, great fourth quarter performance and really appreciate NOV's team for the strong execution. But obviously challenges lay ahead for the first quarter. Nevertheless, we remain hopeful that for the remainder of the year the recovery gets back on track. So thank you all for joining us this morning.

Operator

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

Duration: 64 minutes

Call participants:

Loren Singletary -- Chief Investor & Industry Relations Officer

Clay C. Williams -- Chairman, President and Chief Executive Officer

Jose Bayardo -- Senior Vice President and Chief Financial Officer

Marshall Adkins -- Raymond James -- Analyst

Byron Pope -- Tudor, Pickering, Holt -- Analyst

James Wicklund -- Credit Suisse -- Analyst

Chase Mulvehill -- Bank of America Merrill Lynch. -- Analyst

Jud Bailey -- Wells Fargo -- Analyst

Edward Muztafago -- Societe Generale -- Analyst

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