Q4 2019 Earnings Call
Thank you for joining today's conference call. We will begin in just a few minutes. We appreciate your patience we continue to standby.
[music].
As time, all participants are in listen only mode.
Later, we will conduct a question and answer session. During the question answer session. If you have a question. Please press Star then one on your Touchtone phone.
Please note that this conference is being recorded I will now turn the call over to Patricia Gil Investor Relations you may begin.
Thank you been assigned good morning, and welcome to oil States is fourth quarter 2019 earnings conference call I call today will be led by somebody Taylor oil States is president and Chief Executive Officer Wind project oil States as executive Vice President and Chief Financial Officer, and we're joined by Chris Crag Oil States is exam.
<unk>, Vice President operations, and banks, no precedent that year dynamics or downhole technologies segment.
Before we began we would like to caution listeners regarding forward looking statement to the extent of my remarks today contain information other than historical information. Please note that we are relying on the safe harbor protections afforded by federal law.
Any such remarks should be late in the context of the many factors that affect our business, including those risks associated in our form 10-K, along with other SEC filings. This call is being webcast and can be accessed in oil states is website a replay of the conference call will be available one and a half hours after the completion of the call.
And we'll be available for one month I will now turn the call ever to Cindy.
He Patricia good morning to each of you and thank you for joining us today to participate in our fourth quarter 2019 earnings conference call.
Our fourth quarter results were consistent with our revised guidance issued in January and worked like there. The other significant decline and new at land bites completion activity during the fourth quarter. Our completion services business was particularly affected in our northeast and mid continent regions of operation.
And demand for our short cycle products and our other segment was down sequentially. As a result, that'd be activity decline, coupled with customers de stocking Mary existing inventory.
By their revenues and our offshore manufacture products segment grew sequentially benefiting from increased project driven product rabbinate converting from backlog during the quarter.
Backlog at December 31st 2019 totaled $280 million, an increase of 56% year over year.
Our segment book to Bill ratio for the fourth quarter was 0.9 times with the full year 2019 ratio, averaging 1.3 times.
Despite the challenging market conditions based during the quarter, our business model and capital structure afforded us the ability to generate continued strong free cash flow, which was used to repurchase a portion of our convertible senior notes and further reduced our revolving credit facility borrowings Lloyd.
Well review, our consolidated results of operations and financial position with you in more detail before I go into a discussion of each of our segment.
Thanks, and good morning, everyone.
During the fourth quarter, we generated revenues of 238 million.
While reporting a net loss of 176 million or $2, a 95 cents per share.
Our fourth quarter earnings were impacted by 865 million.
$2.78 per share non cash goodwill impairment charge.
And a $1.7 million bad debt provision on a two plus year old receivable for a customer claiming bankruptcy protection.
The impact on the P.S. released fourth quarter items was $2, an 80 cents per share.
Our fourth quarter EBITDA totaled 20 million.
The EBITDA margin percentage of 8%.
Reported EBITDA was negatively impacted by 500000 severance and downsizing Chargers.
And the 1.7 billion prior year bad debt provision.
The non cash goodwill impairment charge related to our downhole technologies segment.
Arising from among other factors.
A significant decline in our stock price and that of our peers.
Along with reduced growth rate expectations, given energy market conditions.
Recall that this acquisition was funded 48% with oil states common stock.
Yeah, you that $34.05 per share on the data plunging.
He mentioned, we generate strong cash flow in the quarter was 22 million in cash flow from operations.
That's a 10 million in capital expenditures.
And we see 2 million proceeds from asset sales, which resulted in 14 million a free cash flow generation after capex and inclusive of the proceeds from these asset sales.
In the fourth quarter.
We repaid 13 million and borrowings outstanding under our revolving credit facility.
And repurchased 7 million in principle amount of our convertible senior notes heavy 13% discount to par value.
For the full year 2019.
Our net interest expense totaled 18 million of which 8 million was non cash amortization of debt discount and debt issue costs.
Well states as average cash cost of debt for 2019 was approximately 3%.
Our operations have historically, you continue to generate significant amounts of free cash flow.
Since 2014 and through the fourth quarter of 2019, we have been free cash flow positive and all but two quarters.
For the full year 2019, we generated $87 million your free cash flow.
Which again is cash flow from operations after Capex plus proceeds from asset sales.
And this represented an 88% free cash flow with our conversion.
In an approximate 13% free cash flow yield for 2019 based on our current market cap.
We paid down $84 million, an outstanding borrowings under our revolving credit facility.
And repurchased 8 million in principle amount of our convertible senior notes at discounts to par value.
At December 31.
Our net debt to book capitalization ratio was 16%.
And our available liquidity position at the end of 2019.
Was approximately 140 million.
Inclusive of cash on hand, totaling 8 million.
In terms of our first quarter 2020 consolidated guidance.
We expect depreciation and amortization expense totaled 27 million.
Net interest expense to totaled 4 million.
Of which approximately 2 million is noncash amortization of debt discount and debt issue costs.
And our corporate expenses are projected to totaled 12 million.
We expect to invest them and best approximately 40 to 45 million in Capex during 2020.
Which at the midpoint is roughly 25% less than our 2019 capital expenditures.
And at this time I'd like to turn the call back over to Cindy who will take you through the operating results for each of our business segments.
He lives in our offshore manufactured products segment, we generated revenues of $108 million and segment EBITDA at 16 million during the fourth quarter revenues increased 3% sequentially due primarily to an increase in project driven product sales, partially offset by reductions.
Sales of our shorter cycle elastomer and valve products at U.S. activity slowed and customers reduced existing inventory levels.
Segment EBITDA margin was 15% in the fourth quarter of 2019 compared to 16% in the prior quarter.
Our fourth quarter results in this segment were negatively impacted by 1.7 million bad debt provision on a prior year receivable, which like mentioned earlier, our orders booked in the fourth quarter totaled $93 million, resulting in a quarterly book to Bill right show, a 0.9 times and a ratio of 1.3 times.
For the year at December 31st our backlog totaled 290 million at 56% increase.
And Matt booked at December 31st 2018.
Over 75 years, our offshore manufactured product segment has endeavored to develop leading edge technologies, while cultivating the specific expertise required for working and highly technical deepwater and offshore environment.
Recent product development should help us leverage our capabilities and support a more diverse base at energy customers.
And 2020, we are bidding on potential award opportunities to support our sub sea.
<unk> and fix production systems drilling military and wind energy clients globally with our current level of visibility. We believe our 2020 booking should be similar are greater than the levels achieved in 2019.
And our Wellsite services segment, we generated $19 million of revenues $9 billion, a segment EBITDA and I segment, EBITDA margin that averaged 10% on the fourth quarter, which compared to 17% reported in the preceding quarter. This sequential decline in our results was driven by customer.
Budget exhaustion, lower U.S. land completion activity and the reduced number of Frac spreads and operation, which were more pronounced in the northeast and mid continent regions, where the corresponding average sequential rig counts were down 24% and 19% respectively.
International and Gulf of Mexico market activity comprised 23% of our fourth quarter completion services business revenues.
As previously announced we have discontinued our drilling operations in the Permian, reducing our marketed fleet from 34 rigs to nine rigs with the remaining assets serving customers in the Rocky Mountain region.
We are highly focused on streamlining our operations and pursuing profitable activity, where we can support our global customer base.
While focusing on value added services in 2019, we closed or consolidated eight north American operating districts or 19% of our location and reduced head count in our completion services business by 20%.
We continue to focus our core areas of expertise and actively develop our new products to differentiate oil states completion offering.
We are assessing further international growth opportunities with particular focus in the middle late.
In our downhole technologies segment, we generated revenues of $38 million in segment EBITDA of 3 million in the fourth quarter fourth quarter results were sequentially lower due to the decline in us land completion activity, which led to continued under absorption in our manufacturing facility.
Segment, EBITDA margin average, 9% in the fourth quarter compared to 14% in the preceding quarter.
We continue to develop the old trial and commercialize new products in the downhole technologies segment.
Our paper gun integrated gun system, and addressable switch are gaining customer acceptance following their respective commercialization in the fourth quarter. In addition, our premium integrated gun system nine strata Acs has been formally launched and Max and initial group of customers.
During a recent industry conference, we announced the commercialization of and celery perforating products, including a new wireline release tool and two new families of shape charge technology. Our product development efforts are designed with our wireline and NP customers and nine where we strike.
To provide them with flexibility and pre functionality and increased performance, while ensuring the highest level of safety and reliability.
During the fourth quarter, we completed the construction of our new shaped charge manufacturing facility in Millsap, Texas.
The next few quarters, we will be focused on optimizing our manufacturing cost as we increased our in sourcing efforts across a number of our product lines, while increasing and recapturing market share for other perf riding products.
At 2020.
The first quarter has gotten off to a slow start as I'm sure you have heard similar to what we witnessed in the first quarter of 2019 as some operators have deferred resuming operations until later in the quarter. After budgets have been finalized the first quarter 2020 average.
You asked rig count a 791 rig is currently 4% below the fourth quarter average of 820, Greg.
As a result, we expect our U.S. onshore businesses and product lines to build the effects of lower well completions consistent with that of our U.S. peers.
And our offshore manufacture products segment, we forecast revenues to range between 100 $106 million with segment EBITDA margins expected to averaged 13% to 15% depending on product and service mix first quarter margins have been hindered by slow recovery in demand.
And for our short cycle products.
We estimate that first quarter revenues for our Wellsite services segment should range between 85 and $92 million with segment EBITDA margins are expected to averaged 12% to 13%.
For Downhole technologies segment, we believed that our first quarter revenues will be flat to up sequentially did the ramp and new product adoption and range between 38 and $43 million with segment EBITDA margins relatively flat sequentially.
In conclusion, we are focused on our new products and technologies that are coming to market and believed that research and development of these type of new technologies is critical to our long term success.
We also recognize that cost management has to be our focus and lower activity environment.
Our us land based operations are expected to continue to be challenged in the near term given global demand concerns, which have pressured crude oil prices well states remains focused on providing value added products and services to meet customer demand globally cash flow.
Our generation remains a significant focus with near term plans to continue our de leveraging trend and expectations that we will essentially fully payoff our revolver in 2020.
That completes my prepared comments the NASA would you open up the call for questions and answers at this time please.
Thank you we will now begin our question and answer session.
You have a question. Please press Star then one on your Touchtone phone, if you wish to be removed from the Q. Please press the pound fine or the hash key if you're using a speaker phone you may need to pick up the handset first before pressing the numbers. Once again if you have a question. Please press Star then one we have our first question.
From George O'leary with Tudor Pickering Holt.
Good morning Sunday morning team.
Good morning, George.
First question I had was just given you guys are starting to commercialize the integrated got into have the stratix offering out there.
How is adoption rate of that going and strategically what's kind of.
The marketing push any differentiate yourselves from the other integrated or pre assembled offerings that are out there in the market.
Well. Thank you for that question you know I think the great thing as we had a good.
Fourth quarter of trials for both products I think that's first and foremost Dan I would say with both product Scott good reliability and I'd say late in December, especially good reliability on the Stratix system, and what that does but by virtue of the fact that we've been traveling this technology both with operator.
Okay and wireline companies.
They see the rent reliability three the field trial sub debt that was obvious most likely candidates that now.
Pick up the system and we're basically building that with those early trial partners I would say initially.
But of course now that we've rolled out the products through various marketing efforts technology efforts. We've got our sales team extremely focused now on trying to ramp that.
Clearly that's why we kind of gave a relatively broad guidance range for Q1, and we have to watch progress how that progresses into future quarters, there won't be I'd love to psyche open end up the barn door stampeded Amaechi now it, albeit slow.
Steady rollout, which also gives us the ability to ramp our supply chain and manufacturing efforts accordingly.
But I'm just really plays to side, we are where we need to be from my technology standpoint on a reliability standpoint. So now it becomes the go to market.
Efforts and the success that we have in field operations from this point forward.
Great. Thanks, Cindy and an always interested to hear about new technology you mentioned some.
New product offerings in the offshore manufacture products business I Wonder if you could expand on that just a little bit in kind of let us know what direction you guys are trying to point in.
For that business.
No. We don't always report R&D separately, it's always buried in our cost of sales, but again, given our structure and the global penetration that we have we also have a very variety of product lines that that we've had the ability to invest in R&D even through these down.
Markets again, given balance sheet strength and cash flow generating capability. So we think it's as I've said in my concluding comments, the only way that I think year successful while both over the long town is adapter technology to the changing needs of your customer base and we've been very focused amongst a broad right.
Range, if you will have product lines, but it's probably be obvious decide we're trying to enhance our sub sea.
Connector offerings as an example, we focused on expanding some of our capital drilling equipment capabilities at least deepwater rigs have to come out of stack reactivated mode and we do so much on.
Batch and repair recertification, we had that people on the facilities in the talent.
To expand our capabilities around that as well.
We have like many companies when you've got excess capacity in a downturn because of weakness in the energy sector. We look for expanded industrial applications and certainly we are specialist offshore with subsea installation. There's no reason, we shouldnt, mark and when markets as well and.
So we are taking a more proactive effort around.
Trying to participate in offshore wind opportunities as well.
Great. Thank you very much for the Golar Cindy.
Thanks George.
Thank you we have our next question from Stephen Gennaro with Stifel.
Thanks, Good morning.
Good morning state.
So sort of you referenced a wellsite business and.
Your your revenue guidance and your margin guidance your margin guidance team.
A pretty positive relative to the revenue guidance, if I recall, what incrementals for crew to walk you can you talk about that.
Well I work, it's always across your fingers here.
And what I would say is two drivers there number one I think most people if they want to public talk intra quarter fourth quarter would tell you that October was actually a pretty decent month November was horrific December maybe modestly better than November, but nothing to ride home about what that does when you get that wraps.
The before fall off is that.
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Limited ability to manage any kind of costs, whether that's over time you name it and so we took some pretty significant decremental margins in the U.S. operations. There's always some timing issues and you just don't have that many rigs working in the Gulf of Mexico. So you can have timing issues, there and then the middle East.
Also but whether you ran drilling cycle, it's our completion cycle. So this kind of say nothing wet great in the fourth quarter for that business and pretty evident by the sequential decline in EBITDA.
It is up to us to stabilize that an improved those margins I'm not going to say it's easy.
But I think given some of the headwinds we had in Q4 that we should be.
Able to manage that.
And the first quarter.
Thank you and then maybe this is for voice, but when we speak about.
2020.
Cash flow and working capital.
How do you think working capital evolves.
And if it gets pretty neutral or how should we think about that.
Well thanks, Stephen Good question and again, we generated a lot of free cash flow. This year. The 87 million. We did on the backs of about 39 million important capital release, but merger projection purposes, I typically we projected to be relatively neutral or flat in 2020.
Okay.
Thank you and just one final one so you referenced the middle East as a potential area expansion what would that be so buda vision organically or do you think you'd have to make an acquisition to do that.
Well it's.
It's a little about and it depends on how it is not acquisition oriented necessarily we're really focused on.
Organic expansion.
Positioning our operations more effectively to serve a broader range of clients in the middle East third to entered right now what kind of have a narrow product line working in the mentally so we want to leverage some of our.
Existing product lines with broader application and the middle East, we don't need an acquisition, but we're very willing to work with.
Alliances I'm not going to column joint ventures, because they're not that but a lot I worked with other third parties to leverage the delivery of those services for joint benefit if that makes sense.
Much as what was done with trying to introduce geos products through NSR.
Okay. Thank you.
Our next question we have our next question from Kurt Hallead with RBC.
Hi, good morning.
Hi cart.
Hey, Cindy as kind of curious as we know embark on a another challenging year looks like in the us markets for for 2020.
Ill ill space has always been pretty active in at least looking at varying M&A type of opportunities and I just kind of curious is what the land how the landscape looks for potential M&A.
Lease from your perspective on on 20 points.
There are many people, both private and public looking for ways to optimize value creation for their shareholders no secret about that but I want to be very very clear and and I have been with my shareholders I have to overriding criteria number one I don't want to incremental.
Leverage at the end of the die and too I don't want to dilute my strong free cash flows and I'll just generally side. The sad thing about those two criteria that takes probably 100 companies in the space down to about five and that was five are going to be healthy high technology strong company. So.
Not going to tell you, we're not going to do anything on the M&A space, but I will commit to all our view I'm not going to take on incremental leverage and delight my cash flow and so again, we'll look at anything that is available that brings very value to our shareholders, but I'm going to stick with those two tenants.
Got it appreciate that and then just a follow up on on the.
Your question there on the international opportunities.
And I know that you've already have an international footprint right and it looks like the international markets will show some differential growth relative to the U.S.
Same context, Cindy you you've seen a number of companies that have had ambitions to expand internationally.
Two I'd say very mixed results and that's probably being generous.
When you think about the.
Prospects for growth internationally can you give us some insights on how you look at that from a risk mitigation standpoint, and from a through cycle, you know return and free cash flow dynamics.
Well I think you that's a very interesting question and you hit on some things that I don't know everybody always fully appreciate entering international market brings on a lot of challenges, but I think one of our greatest assets as the fact that we've been there for 75 years, probably and I've been at this.
Company for 20, and having a global footprint of operations and incredible talent with my management team that middle management team that knows how to work and our nationally both from a sales perspective business development manufacturing supply chain perspective, I think is invaluable.
Because you don't necessarily Mike the missteps, we've got incredibly embedded programs from import export from compliance from sanction comfort companies FCTA I, just don't expect that when we make a decision we're going to have a miss that.
Of any consequently, there's always risk and doing businesses globally, but that's one of that I think the greatest assets and I'll also tell you when we negotiated the transaction with Geo Thats one of the things that the founder bound, particularly attractive about US is the fact that we do have that global footprint NXP.
Variance level to have an ability to leverage products and services globally, whereas the smaller private company, that's very very challenging and any market. You go into that you've not been end before requires a lot to upfront costs than I, just think that east to market for us.
It's an asset that we have.
That's great great insight. Thank you.
Thanks car.
And we have our next question from previous Dara with Raymond James.
Good morning, guys working.
I guess I wanted to touch on the offshore manufactured products segment first.
Great to hear that bookings can be.
Perhaps even stronger than 2019, when we look at what you're expecting for one to 20.
You talk about whether you're expecting any restocking of inventory.
On a short cycle piece of it and then also we think about the margin profile, but one queues guidance, how does that progress throughout the rest of the year.
Well.
Again, a great question and embedded in our guidance is no recovery and restocking at this point, we think it comes later in the year and these are very specific conversations we have with our customer base and to be Claire.
I'll just say this industry has gotten the message on free cash flow generation. So it shouldnt shock you that customers are doing the exact same thing trying to generate that promise free cash flow just like Lloyd did in our operations, bringing down, particularly receivables everybody's looking at the levers Bacon.
Paul on free cash flow, so Chuck anybody here that Destocking of inventory was one of the major customer initiatives in the fourth quarter. It continues in the first and the other thing I'm going to brag on my team. We are really good about kind of supplying more just in time inventory they know they.
Don't have to carry as much as maybe they did in the past.
So it will come you have to build inventories to stay in business.
And our guidance, we're not expecting it in Q1, and therefore, the lower guided margins. It has nothing to do with offshore products project oriented deepwater operations at all but we're very very low levels on our short cycle right now.
Okay, and then on the downhole technology question to come to come back to Georges.
Towards was alluding to.
In terms of the kind of.
Recapture of lost market share how do we think about the potential for the integrated product rollout, which should we think that second half of 20, when you start to see that recaptures.
As customers of trial that out or is it really more of a 2021 story and that also.
How does that impact the margin profile as you guys are order.
Getting better absorption of manufacturing facilities.
You know even in our guidance. If you look at the range of guidance, you're starting from Q4 up and that Q4 up it's predicated on this rollout an improvement PARP writing revenues.
Just to be clear and so again.
I think we've given you guidance that says we are going up and lot of people talk about market share. The simplest why is tight kind the integrated gone we didn't have any last year now and then all it means is there with a market shift away from more component sales to integrated sales. So to some degree think about this.
Having a fresh start at zero on kind of the integrated gone side of the business and we will start ramping that throughout the year I can't tell you.
How that will progress at this point in time other than to tell you were getting off to the start that we hope for unexpected early this quarter clearly all of the products you know it's easy to look at what we call contribution margin our gross margin in a very accretive to margins.
But you got to have volume and so margin progression ties in to some degree revenue progression, but you do have good incrementals our contribution margin from all of the products in the downhole.
Segment.
Okay. Thank you.
Thank you we have our next question from Marc Bianchi with Cowen.
Hey, Thank you.
I just wanted to first clarify.
The last conversation about the offshore manufactured product margin Cindy if I, if I heard you right. It sounds like the level in the first quarter.
To improve from there, it's really just a function of.
Up short cycle. So if we think short cycle picks up because of rig count in activity. That's the upside to margin otherwise if we take activities flat at probably bounces in that range throughout the remainder of the years at a fair way to describe it absolutely correct Mark.
Okay, Okay, great and then the other one I had.
Just relates to a bigger picture on on the cost footprint for the company overall and you talked about some of the supply chain stuff for downhole, but as we think about the other businesses that you're in.
How do you think about the opportunity for a more meaningful structural cost program.
That could occur or maybe the rig count doesn't improve materially from here.
Well I think you may be pointing towards completion services with your question, but we have been conscious and market conditions over the last couple of years, we've not been sitting on a heavy cost structure and not responding I think that was clear from our comments about district consolidations and focused on profitable.
Product lines that.
Perfect example is drilling at some point you Gotta Seibert.
This hoped far market doesn't look like it's coming back. So we're just exiting other people in this space or exiting non profitable product line. So I'd say, we've done that I think that the cost out pieces from here is a little bit different in that sense that we need to continue on.
Mislead idling that you're not U.S. operations, but I think we really need to focus on manufacturing facility optimization cost absorption optimization, new product rollouts, which leverage that infrastructure, both from a facility standpoint, and I geographic standpoint, with the commercialization of these.
New product and important to me as the acceleration and innovation around these new product and technology offerings that we are focused on right now, but importantly, we're gonna have to look more across our organization to find opportunities for efficient.
The between segments, if you will and that can be.
Again manufacturing optimization reduce scrapped purchasing supply change you name it.
But there's still some opportunities that we have but I would say what I'm not really focused on is reducing a lot of field head count they are necessary to run efficient safe reliable operations for our customers. They are the revenue generators and so.
Anyway, that's really where my body language is but as I've said in my summary comment you have to be cost focused in this market.
Okay. So I guess with that if I just look at kind of completions Mark EBITDA margins here over the past number of quarters.
Kind of caught up in the high teens.
Is that where you think well site could ultimately get through these initiatives that you're talking about.
Or do we need help from the rig count.
I think we need some help from the rig count to be honest with you.
And again.
Well, we've got to be cost conscious, but we certainly made some revenue add to help these operations generate EBITDA.
But it's certainly not unrealistic to assume we go back.
Two high teens margins at some point in time and the other significant focus for that business has to be free cash flow generation again, that's kind of more my more maintenance and maintenance capex intensive business. So there is an acute focus here on ensuring that we're generating EBITDA.
Free cash flow.
Right right. Thanks, very much will turn but I'd, maybe to it and mark just to expand that just a little bit far there again go back to focus on your high value oriented customers. The ones, who are actually investing money right now it's going to be critical in a focus on year more proprietary higher margin.
And product lines that square, that's where the Capex is going to go and we have very good granular visibility.
By district by region by product line, So, we know where to allocate that capital prospectively.
Great. Thanks Cindy.
Thank you.
We have our next question from Ian Macpherson estimates.
Thanks, Good morning, Cindy you.
We've talked in recent quarters about.
The possibility of looking at a dividend for oil states and you.
Very consistent as you say with your generation of free cash and I know that you have.
Very obvious call on that throughout this year in terms of paying down the revolver, but.
Is the dividend option still on the table have you given at more thought and given more.
Maybe more specificity to what that might look like and the timing.
Yes, great question and the the energy services market has clearly a ball double where my working career and it used to be that most people didn't pay a dividend, but we're seeing more and more do it saved.
Are you can say attract shareholders, but the big thing is generating returns.
For our shareholders, we made a very conservative shareholder outreach effort at the kind of last four months of the year, particularly our top shareholders and this was a discussion point and we're beginning to hear more and more shareholders interested in that Lloyd mentioned in his call the consistency of our.
Free cash flow generation three cycle, starting back 2014, I think he said, we've only had two quarters and that fight roughly five or six year period, where we've not Dan free cash flow generated there and so I think it doesn't make sense I generally felt like I would like to have done it's in our life than lighter I did.
Like with the massive fall off in activity and the uncertainty around budgets. Most people are focusing around a 15% year over year us rig count reduction in 2020, it just seemed like the optics and the timing we're a bit premature.
But it is still front and center on my mind, we only gosh, we pay down our revolve our two up slightly over $50 million.
Through the end of 2019 and as I said in my comments is likely to be unless we reallocated to buying in some of the convert is likely to be paid off by the end of this year. So.
You'll hear more about that but again with the fall off in activity in Q4, and the outlook into 2020, it it's kind of felt.
Maybe it was one of my time.
Yes, I understand that makes sense. Thanks, I had a follow up for Lloyd I'm, sorry, I Didnt Miss a segment of the call and Im sorry, if im asking to repeat but.
I was going to ask about full year Capex and then there was also big step down a corporate expense in the fourth quarter. If you could guide that for US also I appreciate it.
Sure he and full year Capex I gave a range of 40 to 45 million.
Which is roughly 25% less than 2019.
Corporate expenses were down largely on lower incentive compensation accruals.
So for the full year.
We adjust them in the fourth quarter.
But thats not I mean, that's why get got at higher for Q1, it's usually a good kind of a reset in Q4 for the full year 2029 game.
Got it.
Thank you Beth.
Thanks Ian.
And we have our next question from Sean Meakim with JP Morgan.
Thank you good morning.
Good morning, Sean.
So Cindy and downhole good to see that you've got the technology Rolling out you've got the reliability you were looking for that so near term clearly going to be focused on.
Wrapping that volume as you said.
Talk about pricing for integrated systems, we focus on me MPS, who are really.
Emphasizing the smaller parts of the ASV, so less on Frac and rigs we typically here about more of the smaller pieces that drives completion costs and of course, there's new products like yours coming into the market while activity and ERP budgets are limited.
Just curious how all that coalesces around what pricing looks like for those integrated systems.
Well I mean that clear we want to be a technology leader.
For our customers. We believe these integrated guns, our premium systems and so we don't intend and we're going to it should create the value for the offering that is there and so we're certainly not going to chase price to the bottom. There's no reason to do that and beads bring efficiencies to the well into the customers.
That is really the whole plant and also the high degree of reliability again with that.
You end up saving money from the cut for the customers in the long lines. So again think of the that differentiated products that should command more stable pricing.
And are you seeing anything different than the marketplace among the competition.
You know I wouldn't say so at the there.
Look everybody is trying to find ways to cost out.
Our systems and reduce reduced pricing to the customers, though there's price pressure, but it's always going to apply to more commoditized services. When you have wide breadth surface providers available that is why we as a company whether its offshore products while side are down hole.
I've always tried to stay on the higher technology more differentiated offerings. Now we are not foolish. We know that we have to be price competitive and we will be but this is not the kind of offering where I see a multitude of cost customers like you see in pressure pumping our suppliers excuse me like you see in pressure pumping.
Thing in wireline operations, and so we feel pretty good about the pricing, we've built into our budgets and into our forward guidance.
Got it Thats very helpful context that makes sense.
In completion services.
Can you talk about any mix shift within your customers as budgets are tight so.
In the past we've seen some shifts in preference.
Let me go through these budget adjustments on one hand.
You are wellhead isolation tool creates value for customers and.
Traded over a number of years, but we've seen periods, where the customers are shifting to what they perceive as lower cost within pressure control. Just are you seeing any any mix changes within the completions portfolio and.
Is that impacting pricing.
Protein again, Thats, a terrific question, but I go back to some of our most differentiated technology does pretty well three cycle and I'll use my extended reach tempers technology as an example.
It's got leading market share at that it absolutely performs best in the field.
With other ones you mentioned isolation tools, specifically some customers are more cost conscious and don't use it.
Customers recognize the value I'd say part of the pain in Q4 as the fact that some of our customers that love isolation cut back the rig count dramatically, particularly in the mid con see kind of get to a double whammy.
From a little bit of activity decline and a mix decline.
So theres no one single answer to that because we work for our everybody from the majors to small independent.
But you can get depending on who is investing capital you can have these kinds of swings. Unfortunately, but I go back my fundamental premise is more differentiated technology with lower competition does better in good markets and in in down markets.
Great. Thank you Sandy.
Thank you Sean.
And thank you we have our next question from Cole Sullivan with Wells Fargo.
Hi, good morning.
Alright.
On the offshore.
Product order.
Type line you mentioned.
2020 could be at or above 19, what are some of the moving parts are areas opportunity that could drive that.
This year and is it.
Floating production awards.
In a bigger part of that in the mix.
Uh huh.
We have I have a forward outlook that supports my guidance to you that is very much project specific at the end of that either by war to generalize that outlook, we're looking for.
Opportunities on kind of fixed platform products, we're looking for opportunities on the subsea side.
Certainly tied towards bug sudsy developments as well as floating production facility is a lot of that Whiting is going to be more in kind of the Brazilian market Guiana, not surprisingly flooding per the fix platform products more in southeast Asia and then we also have.
At a good pipeline last year and expected good pipeline. This year in terms of military type support and awards.
Upside from May as if we can get further penetration on some of the wind installation opportunities.
Okay fair enough.
And then on one more on offshore products.
The ramp on the product on the.
Project driven side was pretty notable on the revenue in Fourq you.
After kind of flattish quarters two here in Threeq.
Yes.
Is there a flattish sort of expectation in the first quarter, there or is it or do we expect that to kind of continued to step higher with the balance you guys saw and 29 team.
Yes, we gave specific revenue guidance on the call out I believe it was 100 million to 106 million I'm looking to light for validation. So.
Thats a modest stepped down that is tied to short cycle.
Not to not to our major projects.
Alright, Thank you I'll turn it back.
Thanks Carl.
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It seems we have no further questions in queue would you like to add any closing remarks before we conclude.
Certainly thank you then that's I just want to extend my appreciation to all of you who dialed in today I know it's been an incredibly.
There's a couple of weeks and there's still more to come for you out just.
Let you go get on the other business, but tell you we do plan to file our 10-K no later than tomorrow. So if any of you want supplemental David you should find it there. So I hope you all have a great weak and make it through the balance of the earnings season. Thank you.
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