Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from the line of Dan Boyd with Goldman Sachs. Please proceed.
Dan Boyd – Goldman Sachs
Hi, thank you. I'd like to talk a little bit about the costs. You have a lot of moving parts there; you lowered wages which should roll through at $500 a day. I'm sure there are other cost savings that also roll through. But at the same time, I would expect the rigs that you currently have working just have higher costs than average for your fleet. So can you give us just with that 60 rigs working, what are your expectations for what we could see cost do in the second quarter?
John Vollmer
I think you're speaking to the drilling business specifically.
Dan Boyd – Goldman Sachs
Yes. Exactly.
John Vollmer
Our operations people have worked hard in the last six months to scale the company back consistent with rig count. As Doug indicated while maintaining our ability to support the great number of rigs I don't see our costs per day being significantly different than what you saw in the first quarter. I think we've successfully scaled the organization where we can stay at similar per day costs.
Dan Boyd – Goldman Sachs
Okay. And then how should we think about on the margin side then and that would flow right through the day rate because the rigs you are working I would expect to be working at higher day rates than average. At the same time, you're experiencing significant pressure on the spot market. So if you could help us understand the spot market margins today and then also what your expectations would be for margins next quarter. I would assume they're down. About what type of magnitude would you expect?
John Vollmer
I think I can actually make it simpler for you. I think from a margin per day perspective, in the second quarter, it will be very similar to what you saw in the first quarter. Not significantly different.
Dan Boyd – Goldman Sachs
That is in a mix issue, correct?
John Vollmer
Yes. The rig counts gone down, you have more rigs on long-term contract, and we did three months or six months ago and those rates are under long-term contracts, therefore, they're not changing. You do have some long-term contracts from a couple of years ago rolling off and new builds coming on. But overall, we think the margins will stay very similar.
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