Danielle Foley - Joshua E. Comstock - Founder, Chairman and Chief Executive Officer Randall C.

McMullen - President, Chief Financial Officer, Treasurer and Director Donald Jeffrey Gawick - Chief Operating Officer Larry P. Heidt - President of Production Services

Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division John M.

Daniel - Simmons & Company International, Research Division Brad Handler - Jefferies LLC, Research Division Kenneth I. Sill - Global Hunter Securities, LLC, Research Division Waqar Syed - Goldman Sachs Group Inc., Research Division Robin Ernest Shoemaker - KeyBanc Capital Markets Inc., Research Division Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Good morning, everyone, and welcome to the C&J Energy Services conference call to discuss the results for the first quarter 2015. We appreciate your participation.

Before we get started, I'd like to direct your attention to the forward-looking statements disclaimer contained in the news release that we put out yesterday afternoon. A copy of the release is available on the company's website at www.cjenergy.com.

In summary, the cautionary note states that information provided in the news release and on this conference call that speaks to the company's expectations or predictions of the future are considered forward-looking statements intended to be covered by the Safe Harbor provision under the federal securities laws. Such forward-looking statements are subject to risks and uncertainties, some of which are beyond the company's control, which could cause our actual results to differ materially from those expressed in or implied by these statements.

We refer you to C&J's disclosures regarding risk factors and forward-looking statements in our filings with the SEC for a discussion of the known material factors that could cause our actual results to differ materially from those indicated or implied by such forward-looking statements. Please note that the company undertakes no obligation to publicly update or revise any forward-looking statements, and as such, they speak only as of the date they were made.

As a reminder, today's call is being webcast live, and a replay will be available on C&J's website. Please note that information relayed on this call speaks only as of today, May 7, 2015, so any time-sensitive information may no longer be accurate at the time of replay.

With that, I'd like to turn the call over to Josh Comstock, Founder, CEO and Chairman of C&J Energy Services.

Thank you, Dani. Good morning, everyone.

Thank you for joining us to discuss our results for the first quarter of 2015. With me today are Randy McMullen, our President and Chief Financial Officer; and Don Gawick, our Chief Operating Officer.

This call will follow our customary format, but first, I will briefly recap our first quarter performance. I will also provide an update on the status of our integration efforts following the closing of the Nabors transaction on March 24, 2015.

Following my comments, Randy will discuss our first quarter financial results in more detail and introduce our new reporting segments, Completion Services, Well Support Services and Other Services, which align with how we are operating in C&J post closing of this transaction. I will conclude today's prepared remarks with a discussion of our outlook for the remainder of the year before we open the call for your questions.

As mentioned, on March 24, we completed a transformative transaction with Nabors Industries to combine with their completion and production services business in the U.S. and Canada.

Accordingly, our financial results for the first quarter of 2015 include the C&P Business for the 8-day period following the closing through March 31, 2015. However, my comments about the quarter are generally focused on Legacy C&J's performance unless otherwise indicated.

The first quarter was an extremely challenging one for the North American oilfield services industry as operators reacted to falling commodity prices. As operators reduced spending and the rig counts sharply declined, completion activity also decreased, which increased competition and drove pressure on pricing for our services.

Our operations and management responded quickly, adjusting our strategy to align with these headwinds. However, our first quarter results were still negatively impacted.

Even in this highly competitive environment, we were able to maintain solid utilization levels through most of the quarter and uphold market share by working with our customers on pricing. We also expanded our customer base, aligning with customers who recognize the cost savings that C&J provides through efficiency gains, and concentrated our equipment in those areas with more favorable breakeven production costs.

For C&J, March was the most difficult month of the quarter as we experienced a significant drop in utilization, accompanied by additional pricing declines. Excluding the $31.5 million revenue contribution from the acquired C&P Business, first quarter revenue of $369.7 million declined 24% compared to the fourth quarter of 2014.

Again, excluding the 8-day contribution from the acquired C&P Business, adjusted EBITDA of $27.3 million was down 67% from the prior quarter. C&J's top line results show that we performed well in light of overall market conditions and demonstrate our resiliency in the face of industry-wide issues.

We entered the second quarter with notably lower utilization and pricing, and even with the aggressive actions we have taken and are taking to scale back our operations and align our cost structure with activity levels, our second quarter results will be adversely impacted. Based on our current May calendar, completion activity levels and pricing appear to have reached a bottom, and we see signs of stabilization in our well servicing segment.

That said, it is still too early to predict the floor, and we expect that over the near term, we will continue to experience some degree of irrational competition by certain service companies that are willing to work at a loss to maintain utilization. As completion activity deteriorated over the course of the first quarter, with subsequent price reduction across all of our service lines driven by the competitive market, we pushed to lower our input and labor costs and implemented strict cost control measures.

During the quarter, we were successful in negotiating substantial price reductions for consumables, including proppant, trucking, fuel and acid. However, there is generally a delay in realizing some of these cost savings, and certain reductions have lagged the drop in utilization and pricing for our services, resulting in compressed margins.

We expect to realize more of these cost savings as we move through the remainder of the year. We are continuing to work with our supply chain to properly adjust costs to current market conditions, and following the closing of the transaction, we are leveraging our greater scale to obtain even better economics and terms with suppliers.

We appreciate those suppliers who are willing to work with us on pricing, and as part of our integration efforts, we are consolidating our vendor list and we'll commit greater volumes for those preferred companies. We've also reduced headcount, and we will continue to evaluate the need for further workforce reductions and other cost control initiatives.

We have combined or closed facility and stacked idle equipment in line with the declines in utilization that we experienced at the end of the first quarter and moving into the second. The rapid implementation of our post-closing integration plan has enabled us to further streamline our business through additional adjustments in headcount, facilities and asset base.

Immediately following the completion of the transaction, we began to implement our integration plan. We are making meaningful progress towards achieving our synergy targets and improving our cost structure while simultaneously enhancing our ability to further support our customers during this difficult time for our industry.

I thought I would highlight just a few of our integration initiatives that are already in progress. We benefited from headcount reductions in our Completion Services business through the elimination of duplicative field positions and personnel responsibilities.

We are focused on the combination of certain U.S. facilities, strengthening high-performing locations and eliminating duplicative field locations, and we are leveraging our expanded customer base and geographic footprint to drive revenue synergies and ensure the strategic presence for our service lines in each of our operating areas to protect market share.

And as I touched on earlier, we have achieved significant procurement savings from applying the better pricing that we negotiated with suppliers earlier in the year through our expanded Completion Services business. And we are continuing to take a hard look at our supply chain for additional opportunities to capitalize on our greater scale and adjust cost to current market conditions.

We will continue to position C&J to capture synergies, create value and maximize the benefits of our greater scale and geographic footprint. There is no doubt that the actions we have taken are positively impacting both Legacy C&J and the C&P Business, and will continue to do so for our combined company.

That said, I would be remiss if I didn't touch on the $4.3 million of EBITDA generated by our newly acquired business in the last 8 days of the quarter. Although I am confident that we have had a positive influence on these assets, it would be unfair for us to take undue credit for the last 8 days of the quarter versus the first 42.

The seemingly improved performance was due to an abnormally strong job mix in this environment executed with exceptional efforts by the entire team. It would be unrealistic to expect this continued level of improvement over the near term.

However, we are having a positive influence on the business, and this performance proves that these assets and people can and will perform at the highest levels with the proper support and guidance. I will now turn the call over to Randy to provide more detail on our first quarter financial results.

Thanks, Josh. Good morning, everyone.

This morning, I will provide additional details on our financial results from the first quarter. During our comparative discussions, please keep in mind that with the closing of the Nabors transaction on March 24, our results for the first quarter of 2015 include the C&P Business for the 8-day period following the closing through the quarter end.

As Josh mentioned, given the structure of our new combined company we are now operating in, we will report results by 3 reportable segments instead of by service lines as previously done. This approach reflects the way we are managing and operating C&J today.

Going forward, our new reporting structure is as follows: First is Completion Services, which includes the hydraulic fracturing, coiled tubing, cased-hole wireline and pumpdown services as well as other well stimulation services of both Legacy C&J and the C&P Business. Second is the Well Support Services, which includes services acquired with the C&P Business, specifically the well servicing line, including maintenance, work-over and plug and abandonment services, as well as fluid hauling, equipment rental and saltwater disposal services.

And third is Other Services, which includes smaller service lines from both Legacy C&J and the C&P Business, such as cementing, directional drilling, equipment manufacturing and specialty chemicals, as well as our Research and Technology division. Corporate overhead and inter-segment eliminations are also included in the Other Services segment.

We generated overall company revenue of $401.2 million for the first quarter of 2015, which, excluding the $31.5 million contribution from the C&P Business, represents a 24% decrease from the fourth quarter 2014. We posted an adjusted net loss of $7.4 million or a loss of $0.12 per diluted share for the first quarter.

The reported adjusted net loss attributable to Legacy C&J for the first quarter was $7.3 million or a loss of $0.12 per diluted share. Adjusted EBITDA for the first quarter of 2015 was $31.8 million, with $27.3 million of adjusted EBITDA from Legacy C&J falling 67% quarter-over-quarter.

Adjusted EBITDA margin decreased to 7.9% or 7.4% excluding the C&P Business. In our Completion Services segment, we generated total revenue of $371 million, $357.4 million of which was delivered by Legacy C&J's core service lines, representing a 24% sequential decrease compared to the fourth quarter of 2014.

The included service lines from the C&P Business contributed the remaining $13.6 million of revenue during the period from March 24, 2015 through March 31, 2015. First quarter adjusted EBITDA was $49.8 million from the Completion Services segment, with adjusted EBITDA of $50.1 million attributable to Legacy C&J.

These results reflect a highly competitive market environment as completion activity fell throughout the quarter. Our overall utilization varied somewhat but was relatively solid for Legacy C&J in January and February, then dropped off in March.

Substantial pricing concessions were necessary in all of our service lines to maintain utilization and protect market share. Similar to C&J's operations, during the first quarter, the C&P Business was negatively impacted by significantly reduced demand and substantial pricing pressure as well as weather-related business interruptions.

Looking forward, our Completion Services segment is expected to continue to face a highly challenging environment as utilizations significantly declined in April and has remained depressed so far this month. We are working in an extremely competitive market, particularly with respect to our hydraulic fracturing operations, where we have made the most significant pricing concessions to sustain utilization and protect market share.

As part of our strategy to ensure we are strategically positioned to capitalize on any market improvement, we will maintain the presence for each of our service lines in all of our operating areas. We are also focused on strengthening our footprint and improving our cost structure by allocating assets into markets where activity is strongest, combining or closing redundant facilities, stacking idle equipment and reducing headcount in line with these cutbacks.

We believe that our cost structure will continue to improve. Our expanded Completion Services business is benefiting from the reduced pricing for proppant, trucking, acid and fuel that we obtained earlier in the year, and we are continuing to monitor our business and work with our supply chain to keep our costs in line with current market conditions.

In addition, we continue to benefit from our internal strategic initiatives designed to deliver cost savings and operating efficiencies, such as our longer-lasting, more cost-effective fluid ends. As expected, we have been able to realize immediate synergies by lowering the input costs for the recently acquired completions business, specifically pressure pumping.

Although activity levels are severely depressed and our pass-through volumes are significantly below fourth quarter levels, we still expect to generate synergies of approximately $35 million for the last 9 months of 2015. The services comprised in our Well Support Services segment are new to C&J with the closing of the transaction.

And the $16.1 million of revenue with adjusted EBITDA of $4.3 million is attributable to the C&P Business from March 24 through March 31, 2015. This segment was also impacted by declining activity and pricing pressure as a result of the sustained weakness in commodity prices.

Entering the second quarter, our Well Support Services segment has continued to experience low utilization levels and rates, although the rate of decline has not been as severe as that experienced in our Completion Services. This business is more stable than Completion Services, particularly in this type of environment, and continues to produce positive free cash flow.

As with our Completion Services segment, our approach is focused on maximizing utilization and lowering input cost, and we are continuing to evaluate conditions and customer demand to rightsize our asset base and workforce accordingly. Our Other Services segment contributed $14.1 million of revenue for the first quarter of 2015, with Legacy C&J contributing $12.3 million, representing a 16% increase from the prior quarter.

First quarter adjusted EBITDA from our Other Services segment was negative $22.3 million. As a reminder, this segment includes Legacy C&J's directional drilling, equipment manufacturing, and specialty chemicals business plus the newly acquired cementing business as well as our Research and Technology division.

Corporate overhead and inter-segment eliminations are also included in this segment. Our selling, general administrative expense for the first quarter of 2015 was $39.2 million, comprising 9.8% of revenue, excluding $25.3 million in pretax cost associated primarily with the transaction.

First quarter SG&A for Legacy C&J was $37.3 million or 10.1% of revenue attributable to Legacy C&J compared to $44.8 million or 9.3% of revenue for the fourth quarter of 2014. The sequential decrease in SG&A is primarily due to cost-cutting measures undertaken throughout the first quarter, in line with the reduced customer demand.

SG&A for the second quarter is expected to range between $64 million and $68 million. We incurred $4.1 million in research and development expense for the first quarter 2015, down from $4.5 million in the fourth quarter 2014.

We believe that the strategic investments in our Research and Technology capabilities that we have made and our efforts to lower our cost base for key inputs and improve our operational capabilities and efficiencies will help us manage through this down cycle. We remain committed to investing in the key technologies that will deliver cost savings, and that positions C&J to be able to accelerate out of the downturn when the market recovers.

Research and development expenses for the second quarter is expected to be approximately $3.5 million. Now let's move on to the balance sheet.

At the end of the first quarter, we had a cash balance of approximately $39.8 million, $90 million in borrowings outstanding under our revolving credit facility and $1.06 billion outstanding under our term loan B comprised of a $575 million term loan B-1 and a $485 million term loan B-2. We also had $34.1 million in long-term capital lease obligations.

In connection with the closing of the transaction, we entered into a new credit agreement, which provides for senior secured credit facilities in an aggregate principal amount of $1.66 billion, consisting of a revolving credit facility in an aggregate principal amount of $600 million and a term loan B facility in an aggregate principal amount of $1.06 billion. We financed the cash portion of the transaction and repayment of our previously outstanding revolver debt with $90 million drawn under the revolving credit facility, a $575 million term loan B-1 that matures 5 years after closing and a $485 million term loan B-2 that matures 7 years after closing.

The blended all-in book rate for the new term loans is currently 8.25%, and the interest rate on the borrowings outstanding under the revolving credit facility is approximately 3%, not including other fees and expenses associated with the revolver. This new capital structure provides us with a financial flexibility to manage through this challenging time for our industry.

Our focus is on paying down debt and preserving liquidity by cutting operating expenses, reducing capital expenditures and improving working capital management. With respect to working capital management, we are working to reduce inventory levels and our DSO, specifically for the C&P Business as we've managed its DSO down to a level that is more closely aligned with Legacy C&J.

Looking at our cash flow statement. We generated $47.7 million of cash from operations during the first quarter of 2015, declining from $69.1 million for the fourth quarter.

This sequential decrease was primarily related to an increase in deferred taxes during the fourth quarter from the election of bonus depreciation with the passing of the Tax Increase Prevention Act, which included a 1-year reinstatement of bonus depreciation. Capital expenditures totaled $48.6 million during the first quarter of 2015, with $2.1 million attributable to the C&P Business from March 24, 2015 through March 31, 2015.

On a pro forma basis, assuming a December 31, 2014 close, first quarter capital expenditures for our combined company was $92 million. We have significantly scaled back our 2015 capital expenditure plan from the previous estimate of $250 million for our combined company.

Our remaining expenditures are expected to range from $90 million to $110 million, totaling $139 million to $159 million for the year or $181 million to $201 million on a pro forma combined company basis. This compares to 2014 capital expenditures on a pro forma combined company basis of $460.5 million.

Depreciation and amortization expense in the first quarter of 2015 increased to $37.4 million from $32.4 million in the fourth quarter of 2014. We expect that depreciation and amortization expense for the second quarter 2015 will range between $83 million and $85 million.

Lastly, our effective tax rate was a benefit of 13.8% for the first quarter. However, based on current projections, we expect it to increase, throughout the remainder of the year, as certain onetime expense items associated with closing the transaction have less of an impact on the benefit rate.

We anticipate no cash tax exposure in 2015 and further expect that NOLs generated this year will significantly drive down our cash tax exposure in future periods. I will now turn the call back to Josh for closing remarks.

Thanks, Randy. As we move through 2015, we recognize that the oilfield services industry will likely remain challenging in the near term, but I'm confident that we will successfully navigate through the downturn.

We believe the strategies deployed beginning late in the first quarter are already having a positive impact, and we intend to stay the course, making adjustments as necessary to effectively respond to the market. Additionally, we believe the increased scale, capabilities, resources, geographic footprint and customer base of our combined company makes us better positioned in the current environment and increases our ability to capitalize on future market improvement.

Even in this tough landscape, I'm excited about where we are as a company today. I want to reiterate that we are actively monitoring the market and managing our business in line with the current challenging conditions.

Our top priorities remain to drive revenue while maximizing utilization, improve margins through cost controls, uphold market share and complete the integration of our new company. Our customers remain extremely focused on lowering their costs, and we will continue to work with them while also seeking ways to deliver greater efficiency and reducing our operating costs.

We will keep a strategic presence in each of our operating areas to protect market share and concentrate assets in markets where activity is strongest. However, we're maintaining a long-term perspective, and we'll opt to sack equipment where it does not make economic or strategic sense to operate in.

We will also continue to invest in key strategic initiatives, through our Research and Technology division, designed to reduce cost, optimize synergies and improve our operational capabilities to further benefit our customers. I believe that these strategic investments provide a competitive advantage in the current market and will lead to improved profitability over the long term.

Through all of these efforts, the near-term focus is on generating free cash flow and significantly reducing debt to strengthen our balance sheet. In closing, I'd like to thank our employees for their continued focus on delivering operational excellence in a safe and reliable manner during this difficult time.

Although we may be facing challenging headwinds, I have complete confidence that with the continued passion, commitment, hard work and disciplined execution that we have always demonstrated, we will successfully manage through this current downturn and be poised to excel as a lean, efficient, fully integrated entity as the market recovers. Operator, we're now ready to open the call for questions.

I guess, as you look at the way the middle part of this year plays out, obviously, second quarter within completions is going to be softer than first quarter. It's hard for us to gauge outside looking in as to kind of where you are in the continuum of getting some of the cost relief that you guys discussed on the call.

So how do you think about the decremental EBITDA margins as we step into the second quarter?

Jeff, our expectation is -- and those will be down in the second quarter versus the first quarter. That's more top line driven than anything.

We're obviously going to make a significant impact on the COGS side on the C&P Business, with a lot of the cost reductions that we both realized prior to the transaction and pushed through their business but have continued to realize on a combined company basis.

As you think about it, is that able to maintain something in kind of mid-single-digit EBITDA margins for that piece of the business?

Specifically talking the completions business?

Correct.

Yes.

And then as I think about as we step forward, obviously, now is not the time for bringing back equipment. But as I think about any equipment that you guys have stacked, what sort of either customer commitment or hurdle rate or margin target would you have to have to bring some of the completion equipment back out of stack once you've idled it?

Yes. This is Don Gawick.

So we have stacked a fair bit of equipment. The vast majority of it is what we consider to be warm-stacked.

So it's available to us on very short notice, and it's essentially operationally ready to go. What we're looking for is really to work with customers who can give us some commitment going forward for volumes of work that will not just bring back the equipment, obviously, for a few jobs or for a short period of time, but some of it that would be on a continuing basis going forward.

Obviously, where we're generating at least some small positive margin, but where we can get a commitment that's long term and have our people stay working and more of the equipment deployed in, especially, the best basins, we will do so.

And then last question I have, for Randy, just around working capital. You mentioned it a couple times in the release and on the call.

Any feel for kind of magnitude of opportunity you see in terms of working capital, kind of recovering cash from working capital in the middle part of the year?

Well, what we alluded to on the -- in the release, in both -- and then the scripted comments is that as we move throughout the year, we expect to significantly reduce our outstanding on the revolver, which is currently $90 million. And the majority of that reduction, if not all, will come from working capital.

So you can assume at -- probably at a minimum, $50 million coming out of working capital to reduce that outstanding balance.

Don, you alluded to the -- some of the equipment that's warm-stacked. Is it possible to quantify just how much of your frac fleet today is stacked?

And then does your warm-stacked definition, does that -- you still have crews for that equipment? Or have they been let go?

So we're intentionally staying a little bit heavy in terms of our personnel because we are seeing, in fact, some indications here that -- and we are managing to keep a number of our crews that have been somewhat slow through the March and April time frame busy. And we do have to be able to respond fairly quickly.

In terms -- it's varying week by week in terms of how much of our equipment is working. But on a very rough basis, we have about 500,000 horsepower that has been stacked, principally all warm-stacked.

A lot of that's looking at getting -- I say a lot -- some of it is looking at getting active again throughout this month, and we anticipate seeing at least some of that equipment going back. We do have crews that go operate it in terms of the work that we have visibility on right now.

Okay, all right. And then just one more from me and I'll jump back in the queue.

But when you look at -- I guess this is for Randy. When you look at the pro forma revenue, call it, for Q1 and then look at the internal forecast for Q2, at this point, do you expect your Q2 revenue to outperform the rig count or underperform?

With the rig count being down, call it, 30% quarter-over-quarter roughly?

Yes. I mean, our expectation is, looking at it on a pro forma basis, that we would outperform that 30%, but not significantly.

Maybe different -- sort of a different line of questioning first. As you've taken in the Nabors -- all of the Nabors completion and production assets, could you speak to how much of it you -- well, frankly, you don't expect to work.

To what degree is there a real calling to sort of -- not just because of the environment but also because of the state of the asset?

No, I mean, it depends on the service line. If you think about the completions service line, we expect to work the majority of those assets.

And then in a strong environment, we would be ready to pull in those assets, they're quality assets. And on the work-over side, there are some old assets that aren't necessarily re-deployable, but we expect to upgrade those assets as we see increased demand and activity for those.

So it's not like we have a lot of just old assets sitting around, definitely not on the completion side at all. So like I said the work-over, if there is idle assets that aren't re-deployable, that is on the work-over side.

Okay, okay. That's helpful context.

Maybe a question for Randy, but if -- you mentioned specifically -- you guys mentioned specifically that it was a very strong 8 days and perhaps not representative of the environment. Clearly, Nabors, when they still had the business in their -- on their books, so to speak, it was not as strong a period, not by a long stretch.

So recognizing where you guys stand on guidance per se and in light of your comments around bottoming, can you give us a little bit of directional help specifically in that well servicing segment for 2Q revenues? [indiscernible], excuse me.

As far as the revenue decrease?

Yes.

Not providing specific guidance, we do expect it to be down. Obviously, not as significant as what we're seeing on the completion side, as we said on the -- through the script.

There's -- that business is a bit more stable. We do expect it, again, to be down but not near the level that you're seeing in the drop in the rig count and not near what we're expecting on the completion side.

Right, okay. I guess, that's some directional help.

And I guess maybe sort of to Jeff's question but for, specifically, Well Support Services and, again, maintaining positive EBITDA margins is a realistic expectation for the second quarter?

You're talking specifically to the production business, correct?

Yes.

What we're calling the well servicing? Yes, yes.

To answer your question, the answer is yes.

Might as well hit the last segment, which is Other Services. This one, I guess, is tough because this appears to be where a lot of the potential growth is going to be.

Is that revenue going to change significantly, Q2 versus Q1? Or -- and will there be any big changes in the...

Not -- no, Ken, not significantly, no.

Okay. So that's just kind of -- it's going to be what it is for now until things get better theoretically?

At least over Q2, that's correct.

Okay. And then I was wondering if you guys could comment on -- you'd said before that you were keeping some infrastructure and people in place in anticipation of the merger.

Your -- you guys usually get better operating margins than a lot of your peers and they were kind of in line this time. How much impact would you attribute or can you attribute to keeping things -- keeping a little bit more capacity in anticipation of the merger and how that affected Q1?

Well, really, I don't -- it wasn't really related to the acquisition. It was just more to our position around maintaining share, and we were obviously pricing our services in line with the market to do that.

On the -- could you provide any breakdown between fracturing, coiled tubing and the revenue breakdown on the legacy business in the first quarter?

Sure. Waqar, this is Randy.

Fracturing was down 24% for the Legacy C&J business, Q1 over Q4. Coiled tubing was 17%, and wireline was 27%.

Okay. So I assume that wireline was probably more impacted by the Bakken typical slowdown in the first quarter?

There was certainly some impact there. We -- again, the Bakken has been hit considerably.

It's been our largest operating base. There was certainly impact there.

Overall, though, we did see just softening in terms of utilization and pricing across all of the basins. So I would say, though, that the -- our largest basin was certainly hit amongst the hardest.

Okay. Now typically, we see, in the second quarter, some seasonal upward movement in the Bakken.

Would that have an impact for you guys both in the wireline side as well as on the assets acquired from Nabors or the C&P assets, which are heavily weighted towards the Bakken?

Yes, I think this year, the seasonality is less of an issue than what we're seeing with commodity prices. And you're right, typically, we come out of that winter season and the spring thaw.

There's issues around moving equipment and road restrictions et cetera. We're certainly seeing some encouraging signs with the commodity price here just over the last few weeks.

I think the determining factor is going to be if those are sustainable or not. So if prices hang in there, we are seeing some indication of people getting busier in -- towards the tail end of the second quarter, where our customers are talking about getting back to work, again assuming commodity prices hang in there.

So just in terms of this backlog of completion work versus -- that exists today, in the Bakken so far, you're noticing any -- on a month-to-month basis, any change relative to the rig count, completion activity still falling at the same rate as the rig count? Or is it falling less or not?

I'd say it's staying in line.

Staying in line, okay. And then there's been some talk about the re-fracking opportunities.

Are you seeing any of that?

We're hearing a lot. There's a lot of hype around it, a lot of discussion.

To be honest with you, we're not seeing much, if any, actual activity. It's -- literally, some very small number of wells have been tried, and there's been some mixed results.

I'd say the general feedback from most of our customers is they remain to be convinced of the technique and the validity of being able to go out and reliably predict the kind of well performance you'll get. So there's been some good results.

There's been some results that have not been that good. So I think the jury is still out at least from the perspective of the customers I've spoken to.

So the numbers are still very small.

Now in terms of the re-fracking market, I think the technologies that some of the big pressure pumping companies are highlighting, like BroadBand or AccessFrac has some divergent technology that they're using for that. If the market moves towards that direction, do you have the technology to provide that kind of service, diverging technology?

Yes. I mean -- this is Josh, Waqar.

So from a re-frac perspective, there's a little bit of marketing that goes along with some of these per se technologies that they're talking about. But the truth of the matter is it's not real science.

It's a pretty easy approach. We can do it.

We've done it. We know how to do it.

We don't need a divergent technology to do it. That said, there's not much technology to diverge in, and we have the capability of doing that.

Re-frac market, if we have sustained commodity prices, and when I say sustained, I'm talking lower commodity prices for a longer period, which I'm not sure if there's any one of us believe that's going to be the case, and most of our E&P companies aren't believing that's going to be the case. You will see re-fracs.

And you will see not only the bigger guys doing re-fracs or us doing re-fracs, you'll see smaller guys doing re-fracs. And a re-frac is as simple as hooking onto the top of the well and pumping large volumes of sand and water down the hole and fracking all the perforations at once and letting it go where it goes or you can use divergent technology.

Either way works, and you will see guys trying all different versions of re-fracs. Just like they did in the beginning of the shale when they tried different versions of cross-linked fluids versus proppants versus slick water jobs and sands.

So and you're going to see folks try different styles. At the end of the day, they're going to look at the lowest cost operational option that has the best result.

And I personally believe that you'll see re-fracs if drilling doesn't come back. But with the amount of drilled and uncompleted wells that we have, you're going to see those hit first before you're going to see re-fracs.

And then by the end, I believe commodity price is going to be at a level where drilling is starting to take back. And we've seen indications.

I mean, we talk about a little bit in the script, but we've seen indications in May that -- it's still early to predict, but there's chatter. There's calendars filling up again on a lower asset base, obviously, but activity is better than April.

Yes. So as you look into the third quarter, do you feel that your input costs may come down, you could -- your margins may bottom in the second quarter?

Do you feel that? Or do you think there's more downside to the margins solely in the third quarter?

Waqar, it's Randy. Yes, it does feel like that the second will be the bottom month from a margins perspective, at least where we sit today.

Okay. And then on the top line side, do you think the third quarter could be better than the second?

Yes. I mean, on the top line revenue side, third quarter can be -- we expect it to be better than second.

And just a little bit of color on the cost side, costs are all over the place. Obviously, larger volume input costs like sand that are larger dollar amounts, the percentage discount is lower.

But we've seen anywhere from 25% to 40% based on what you're comparing it to and what -- who the vendor is. But other areas, like acid, for example, we've seen it go from $3 a gallon to $0.85 a gallon.

We've seen trucking cost that hauls -- the trucks that haul the sand go from over $1,200 a load to $400 a load. So there's been significant cost -- input cost drop over the first quarter and into the second quarter.

There's just a lag in recognizing those, obviously, as you're booking out going forward.

So Josh, I wanted to ask you -- most of my questions have been answered, but you've been taking some steps in the international arena to get established. And with Nabors kind of as your partner now, there's some more opportunity there.

I know that's part of the long-term plan. So could you just update us on what the next steps are in your international strategy?

Yes. I mean, obviously, Robin, we focus on the Middle East.

We still think that that's the best market, internationally, for us to start off in. I will tell you that we have seen -- we've gained recent traction, put it that way.

And we would -- it would not be a stretch by any means to say that we would be likely to deploy more equipment in that region by the end of the year, especially on the coiled side but even possibly on the frac side. But in this month and looking ahead, we have definitely gained some traction.

And so we're seeing positive signs there. There are other areas around the world that have shown interest recently, and we would gauge where Nabors has a presence and gauge what the opportunities are and how we would best get into an area with the most effective way with the lowest cost.

And so as those opportunities arise, we'll evaluate them. But for now, it's -- we're focused on Saudi and the entire Middle East region, and we are gaining traction.

Okay. So just to clarify, on this -- to the extent that you move equipment there for new contracts, would this be new equipment or perhaps some equipment that you could move from the U.S.

market?

Well, it depends on what U.S. market is doing, right.

If we have excess equipment, we'll move existing equipment. If not, we'll move new equipment.

With our manufacturing capabilities, we have the option to respond pretty quickly. What we did the first -- with the first sets of equipment that went over there were existing equipment, and then we built new to replace them for the U.S.

operation. So it's just going to depend on what the market is doing and where we are.

And then one thing to highlight on that point is with the alliance with Nabors, Nabors was within Saudi, in the middle of a process of getting approved for cementing and Other Services that we have now acquired. We intend to continue that approval process and get approved to do that work.

And so it would not be a stretch to be moving additional assets for newer services into that area, cementing being one that has shown a lot of potential opportunity for that region.

You guys addressed how much horsepower you guys have kind of warm-stacked. How do you think about coiled tubing and wireline?

How much is just kind of sitting around? And maybe some comments on your forward look here based on the calendar, how you think utilization for those types of assets is going to trend near term?

Yes, on the coiled side, specifically, we've kept virtually almost all of the units available to go. One of the interesting trends that we're seeing with what's happened in the marketplace is a significantly increased demand for smaller diameter coil.

And as a result, we've deployed a number of units with the smaller diameter coil. So we have units available able to respond to what had become, kind of a traditional 2 inch or even 2 3/8 inch market as well, the ongoing work there, which clearly have slowed down and then units that are ready to go with the smaller coil as well.

So only a handful of the coil units are not currently ready to go. On the wireline side as well, we've kept a fairly limited number of units.

We've got 92 wireline trucks. We've only parked a handful of those.

We've got specific demands for various services. A number of them are committed to the perforating side of the business.

But as well, a number of them work almost exclusively in logging, which tends to be a very nice high-margin business for us. So the numbers are quite small.

It's literally a handful in both cases.

Okay. And then to address, I think, Randy, you talked about $35 million in synergies as an expectation the last 9 months.

How do we think about that, or I guess broader synergies, relative to the targets that you guys had laid out when you first talk about the merger opportunity given how much the market's changed? And I guess, maybe defining synergies versus cost cuts or cost reduction opportunities, how do we think about this cost structure on a next couple of year basis?

Yes, the last question, the synergies are purely related to -- or primarily related to the input costs. [indiscernible] guidance that we listed on the call, some of the large consumables as part of the frac process.

That's what we're focusing on, around synergies and not headcount reductions. But the number that we gave, the $35 million, if you annualize that for the year, it's very close to the $50 million estimate that we originally gave for 2015.

And that original estimate was, obviously, built around much larger, much higher activity levels. So I can say we were -- we've been very pleased with the progress that we've made on that front and the dollars that we were able to save by lowering the input cost on the C&P Business.

And as we look beyond '15, obviously, to activity levels, but clearly, given the ability -- given the fact that we're able to meet our general guidance at activity levels that are substantially lower than when we provided those, we feel like there's enormous opportunity once utilization returns and activity levels return to really take that synergy number well above the $100 million annual run rate we gave for the out years.

Okay. And then touching a second just on some of your comments around coiled tubing.

The last couple of weeks, a couple of service companies have talked about dissolvable plugs being a big opportunity. I think even -- I think Schlumberger called it out as a specific opportunity for them.

How do you think about the dissolvable market, in general, relative to the opportunity for coiled tubing especially over the next couple of years?

Well, the dissolvable plugs was an idea that came out in 2001 and didn't gain much traction. There's more that we clean out in the wellbore than just the plug.

Obviously, we drill out the plug but every time you frac a job, there's sand left in the wellbore. You've got to go -- sometimes, you've got to go wash out between setting plugs because you've got sand in the way, sand lays in the wellbore.

And so even though you can have dissolvable plugs, you're still going to have to run coiled tubing in the wells and clean out the wellbores. E&P companies know this.

Coiled tubing companies know it, and the guys designing dissolvable plugs know it. It may affect downhole motors.

You may run more wash tips and that -- those types of things, like we used to do before we even had composite-rich plugs, where you just set sand plugs over perforations and you'd just run a wash tool. That may occur, but again, I think we're a long way off from dissolvable plugs affecting coiled tubing in the least.

Josh, E&P companies regularly highlight the efficiency gains and they oftentimes point to the reductions in drilling times. And sort of a follow-on to the dissolvable plug question, but if you look out right now and sort of into the future, are there any actions or technologies that you're developing or others that will allow you to actually frac the stage faster?

That'll frac it faster?

Yes.

No. I mean, so the only -- a frac is just a rate and pressure, right.

And so -- and volumes. And so the only way you get a faster frac is if you pump a higher rate and less volume or the same volume and a higher rate.

But the wellbore dictates essentially what it's going to take when you're pumping the frac. And so from a faster perspective, no.

I mean, where you gain efficiencies around frac is equipment life on surface. So you have less downtime on surface, things like zipper fracs, areas around wireline where you can -- sliding sleeves.

That's an example that you can gain efficiency if there wasn't a whole host of other problems with sliding sleeves. Things that you can do mechanically to keep the fracking equipment operating more efficiently as far as just keep it up and running, those are the things that you can do to gain efficiency.

But actually pumping the frac job, there is nothing that we're aware of that you can do to make for a more efficient frac on a per-stage basis. Now you can reduce stages.

You can pinpoint stages. You can try all sorts of things on that case.

But if you'd -- just asking me in general on efficiency altogether, I think from a drilling perspective and a fracking perspective and a wireline perspective, we have -- the material gains in efficiencies in drilling and completing wells have been had. And now where efficiencies need to come from are -- and I'm talking about just in the operational procedures.

Where efficiencies need to come from now and will come from are better tools, better reliable downhole motors, better reliable plugs, better perforations, better equipment on surface. That's where efficiency gains are going to come from, and that's going to be more cost gains and less of a time gain.

Okay, fair enough. And next one is, I know things change.

But at this point, do you believe that you guys would pursue additional acquisitions this year? Or will the balance of this year be dedicated to digesting the Nabors assets and focusing on the organic growth and technology initiatives?

Well, if you ask me today, I'd say, the latter is the approach, and that's how we're thinking about things. That said, it's going to depend on the market and it's going to depend on the opportunities and depend on our balance sheet.

The other thing I would say is on the Nabors side, when it comes to integration, one of the challenges when we first announced this that everyone kind of pushed our face was, "Can you do this? Can you integrate this?

This is the biggest -- you're buying a company 2/3 your size." This is -- there wasn't a lot of confidence from others that we could do this, and I would tell you that obviously, we had the benefit of this transaction, take a long time to get done.

And so that allowed us plenty of time to plan and be ready for integration. But I mean, within days of closing the Nabors transaction, integration was happening instantly.

I mean, we moved people over -- 2,700 people over within the first 24 hours on email. The Monday after closing, we had people in offices, introduced to C&J, in their new offices by 1:30 in the afternoon.

And we've got guys from an operational perspective, especially on the completion side, reporting in the right ways. And that integration is essentially done.

And we're already seeing -- as Randy mentioned by the synergy, we're seeing really strong benefit and success in the integration. And so the integration with Nabors is not difficult when you get 100% of the people pulling in the same direction, and that's what we've got.

And so I think that people are going to be really surprised at how this goes, especially as things start to recover. And so that gives me the confidence if we had the balance sheet capacity and we had the right opportunity come along, the integration of Nabors would not delay me in looking for another transaction.

Okay, good comment. And then the last one, a quick one and -- but just real -- and this is probably for Don, the outlook on your California operations and just the impact, if any on, the drought that's happening out there?

John, this is Larry Heidt. California, obviously, is a pretty challenging market, but I think what we're seeing out there now is, I think we've stabilized that market and are looking forward.

Obviously, these prices stabilize, oil prices, commodities stabilized, and I think we're in pretty good shape out there. But it has been a difficult market to say the least.

All right, operator, I think we're out of time. So with that, we'll wrap up the call, and we look forward to speaking to everyone next quarter.

Thank you.