Question-and-Answer Session
Operator
(Operator Instructions) Our first question will come from the line of Geoff Kieburtz – Weeden.
Geoff Kieburtz – Weeden & Co.
Thanks. I think I know the answer to this question, but just in terms of your guidance range, the primary variable is the North American Fluid Control and Wellhead business?
Peter D. Kinnear
Geoff yes. That's correct. That's obviously our biggest risks and exposure.
I would like to make one correction. Bill indicated that only 40% of our Wellhead revenue was international, it's actually 70% international and 30% on the North American side, so just to correct that.
Yes, I mean obviously, the North American activity issue and what the rig count's going to do is a big issue for it.
Geoff Kieburtz – Weeden & Co.
And in your guidance, what have you assumed in terms of the U.S. rig count?
Peter D. Kinnear
Yes, I mean that's a good question and we're somewhere around, on average, probably 1,100 to 1,300. We think in the second quarter it could go under 1,000 in the second quarter. Today the rig count sits at 1,300 plus and so we're in that kind of range, Geoff.
Operator
Our next question will come from the line of Rob Mackenzie – FBR Capital Markets.
Robert Mackenzie – FBR Capital Markets
Quick housekeeping question. I think you mentioned it in your prepared remarks, but I missed it. What was Subsea revenue in the quarter again?
William H. Schumann, III
$788.
Peter D. Kinnear
Yes, $788 million, Rob.
Robert Mackenzie – FBR Capital Markets
$788 million, thanks. On the margin side in production systems really nice margin expansion there, can you give us a feel for where that came from? Was that capturing, perhaps some material cost deflation? Or where else did that come from? And then looking forward, how should we think about how that plays out, particularly as steel prices weaken further or continue to stay weak?
Peter D. Kinnear
Well, I think in the quarter we had a pretty good execution and a favorable mix to drive our margin. I think as we dial forward, we're in a situation where the oil companies, obviously, are asking for discounts, and we're dialing back to our suppliers asking for discounts, and I think our margin expectations are – we have backlog, obviously in Subsea that's going to carry us forward into this year, '09, and I think our margin expectations are around what we achieved in '08 in the Energy Production sector.
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