Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Jim Crandell – Barclays
Jim Crandell – Barclays
Overall do you believe you’ve seen the bottom on a quarterly basis in international revenue? Secondly, what is the general magnitude of weakness you might expect in international profit margins in coming quarters?
Chad Deaton
We don’t think we’ve seen the bottom yet on international revenue. We’re hoping that occurs in Q3 maybe into Q4. We’re expecting that international margins backing out anything for doubtful accounts etc. we’re probably looking at somewhere in the 350 basis points ongoing deterioration.
Jim Crandell – Barclays
That would be true in probably all geomarkets or all major regions?
Chad Deaton
Yes, I think we’ve got a little bit more opportunity in the Latin America market due to obviously Brazil and Mexico now we’re pretty well established on these Alma projects. We do have some startup costs that are taking place as we move on to these land projects that Martin referred to on these 450 wells. For the most part I think the other two regions will take the brunt of some of the margin deterioration.
Jim Crandell – Barclays
You’ve had some nice product line wins that you talked about on your call. To what extent over the last three months have you also won contracts on bundled services or IPM basis and is there any sort of change in your willingness or aggressiveness in trying to beat that part of your business?
Chad Deaton
I think we had as many wins this quarter as we talked about last quarter. We’ve had this discussion before whether where do you switch over from bundled services to IPM. Again IPM to me is where you manage the entire project from picking locations to cleaning locations to managing the rig, the whole works. Again, we find that in certain places of the world, clearly Mexico, a little bit in a couple other countries in Latin America, to some degree Russia, Algeria. What we’re seeing is a lot more bundling of our services where we’re winning three, four, five product lines not necessarily managed locations.
This latest three wins that Martin talked about in Latin America clearly we’re acting as a sub-contractor to three independent so-called IPM Mexican companies. We don’t take the risk but we get to do what we do very well and that’s provide our services and technology to them. If we could do more of that, that’s a preferred model for us.
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