Good day, ladies and gentlemen, and welcome to the NOV third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Blake McCarthy, Vice President of Corporate Development and Investor Relations. Sir, you may begin. Welcome everyone, to NOV's third quarter 2023 earnings conference call. With me today are Clay Williams, our Chairman, President, and CEO, and Jose Bayardo, our Senior Vice President and CFO. Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities laws. They involve risks and uncertainty, and actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or later in the year. For a more detailed discussion of the major risk factors affecting our business, please refer to our latest Forms 10-K and 10-Q, filed with the Securities and Exchange Commission. Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding GAAP measures are in our earnings release available on our website. On a U.S. GAAP basis for the third quarter of 2023, NOV reported revenues of $2.19 billion and net income of $114 million, or $0.29 per fully diluted share. Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA, as defined in our earnings release. Later in the call, we will host a question-and-answer session. Please limit yourself to 1 question and 1 follow-up to permit more participation. Now, let me turn the call over to Clay. Thank you, Blake. NOV's third quarter revenues of $2.185 billion were up 4% sequentially and up 16% compared to the third quarter of 2022. The company posted fully diluted earnings of $0.29 per share for the third quarter, up $0.21 year-over-year, and EBITDA was $267 million. Both sequential and year-over-year EBITDA leverage was 24%, driving consolidated margins up 50 basis points sequentially and 190 basis points year-over-year to 12.2% in the third quarter. NOV's extensive offshore business drove results. Consolidated sales destined for offshore markets increased 10% sequentially and roughly 40% year-over-year, lifting our offshore mix to 46%. All three segments posted higher offshore revenues sequentially, with Completion and Production Solutions and Rig Technologies both posting solid double-digit growth. Our strong franchises in oil and gas, as well as offshore wind, carried the day. Following a decade of underinvestment, which saw North American shale crowd out spending in offshore and international land drilling, we are pleased to see growing momentum in several offshore basins around the world, in addition to international land. Underpinned by LNG and constructive commodity prices, global offshore FIDs look to be in the range of $140 billion in 2023, up 60% from the average of the preceding eight years, and 2024 looks to be even stronger. Offshore service capacity continues to tighten broadly, driving improved economics for us and our customers. Leading edge day rates for high-spec drill ships are barreling towards $500,000 a day, and jackup rates are rising as well. Importantly, we are hearing of operators looking to lock up rigs for longer terms, which we hope will give our customers greater confidence to pull the trigger on capital projects that will drive future NOV orders. Although we are a long way from offshore rig new builds, we are intrigued by inquiries we've received related to three Eastern Hemisphere national oil companies considering potential new build jackups and a new build floater. In the meantime, our Rig Technology segment is benefiting from strong demand for aftermarket spares and reactivations as offshore rigs continue to mobilize. Rig Technologies aftermarket increased 10% sequentially and 46% year-over-year. Completion and Production Solutions saw bookings rise 18% and posted a book-to-bill of 114%, led by our Subsea, XL Systems, and Process and Flow Technologies business unit selling kit into offshore developments. Rig Technologies capital equipment bookings for the offshore were up 14% sequentially, but overall bookings fell $44 million, following Q2's strong demand for land equipment. Our consolidated revenues into international land drilling programs increased 3%, with Wellbore Technologies leading the way, posting double-digit sequential gains coming from Africa, Asia Pacific, and the Middle East. Consolidated, international and offshore sales gains were partially offset by sequentially lower revenues in North American land markets, down about 2% sequentially. Low gas prices and lower levels of U.S. drilling softened demand for drilling equipment orders, but CAPS benefited from some large eFrac equipment orders in the third quarter for the U.S. It's been an interesting time. We've navigated a decade of significant global underinvestment in oil and gas everywhere, except North American shale, which was responsible for 80% of global oil supply growth over the past 10 years. During the last few years of this journey, we've been pummeled by inflationary gales and a supply chain tsunami. In response, we've cut costs everywhere except new technology development. We've pushed prices to try to keep up with inflation, which has been challenging. Nevertheless, I'm very, very pleased with the reception our new products are getting. As the oil field goes back to work, our customers are benefiting from NOV's new solutions that are driving better performance, better safety, and lower emissions. They like what they are seeing, and demand is building, notwithstanding their pledges of capital austerity and lack of animal spirits. Let me take a few minutes to address revenues, margins, and cash flow. First, with respect to revenue, NOV's performance has been strong. Specifically, NOV's top-line growth rate since our low point in the first quarter of 2021 has been at a rate of about 25% annual growth, 6% higher than the Big Three average through the same period. This has been driven by new bits and new drilling motors, new composite pipe designs, new digital products, including new wired drill pipe, high-speed connections to the bottom of the hole, new edge computing products and new control systems and new automation tools, all of which drive performance for our customers.... Thus far, NOV sales outperformance has been accomplished without a meaningful capital equipment recovery. It has been achieved through resetting our activity-driven product and service portfolio to offer what we knew all along our customers would eventually need. Oil field down cycles all end in, well, up cycles. At the end of every down cycle and the beginning of the next up cycle, scarred by their near-death experiences, oil field service survivors generally suffer from chronic PTSD. They all swear never to spend a dollar of capital they don't have to ever again, and never, ever to stretch or wreck their balance sheets ever again. 1992, 1999, today. In a lot of ways, following periods of underinvestment, solemn pledges of capital discipline kind of mark the opening ceremony for an up cycle. As an up cycle gains momentum and activity rises, the challenge oil field service companies face is less financial fidelity and more related to the laws of physics. The oil and gas industry consumes highly specialized, fit-for-purpose equipment voraciously, putting a bit five miles into the Earth to hit a precise target devours expensive pipe and rigs. As demand rises and equipment is consumed, prices rise to ration its availability, leading to outsized margins and returns for oil field service participants who own scarce equipment. When E&P companies face these equipment shortages, they actively sponsor additions to fleets through profitable, longer-term contracts to both incumbents and startups. And as the up cycle progresses, well, you know the rest of the story. Now, perhaps this time will be different, but we shall see. The second thing I'd like to talk about are margins. While our margins continued to improve, they still remain below levels we need to generate adequate returns. Thus, we are focused on pulling the levers we can control, namely price and cost structure. We announced that we intend to further streamline our overhead by going from three segments to two segments, Energy Equipment and Energy Products and Services, starting January 1st. This is part of the $75 million cost reduction program we disclosed last quarter, and is designed to make our business more efficient while capitalizing on the new technologies we are bringing to the marketplace. We will be providing historical pro forma financials for your models next quarter. As we continue to reduce costs, we are also intent on putting better quality and higher margin orders into our backlog. We've been very intentional about price, risk, and commercial terms on large tenders, particularly in the offshore and international markets. Predictably, this has led to missing some project awards on price and terms, but having been stung by inflation, we are sticking with our disciplined approach of price leadership, and quarter by quarter, we see our competitive positioning improving as end customers come to appreciate execution, reliability, and technology more and more. We're confident in our strategy because we have good visibility on a growing pipeline of tenders, plus we are carrying solid and stable backlogs. $3 billion for rig, which has had a book-to-bill of 102% through the last year, and $1.6 billion for Completion and Production Solutions, which has posted a book-to-bill of 106% through the past year. And as I mentioned earlier, we've been able to post significant revenue growth since 2021, up 75% on the strength of the rest of our portfolio, our non-capital equipment products. Our expectation is that as the up cycle emerges, these new businesses, together with a blossoming capital equipment demand at higher margins, will translate to overall higher margins and returns for NOV on a consolidated basis. Said another way, our quick turn transactional businesses have enabled NOV to post strong revenue growth, while our later cycle equipment businesses represent additional optionality to a future up cycle. Finally, free cash flow during the quarter improved $114 million sequentially, but remains negative at $34 million. As we discussed on last quarter's call, the healing of the global supply chain has led to an acceleration of raw material and component deliveries for our businesses, and net working capital remained at an elevated 33% of annualized revenue during the quarter as a result. This trend is expected to begin reversing during the fourth quarter as our product shipments continue to catch up to the supply chain, which will improve our cash flow sequentially. Looking ahead to next year, the normalization of supply chains and working capital intensity should enable NOV to generate meaningfully positive cash flow and position us to begin returning more capital to our shareholders. So to summarize, one, NOV's new products and technology are amazing and are fueling strong revenue gains for the company without much assistance from our later cycle capital equipment businesses. Two, if history is a guide, these capital equipment businesses will begin to grow and then grow sharply as an up cycle matures, but for now, remain mostly optionality. Three, margins have been pressured by extraordinary supply chain disruptions and inflation, but progress in these areas has lifted margins steadily from break even to 12.2% in 2.5 years. And four, after cresting in the third quarter, we expect working capital to decline in the fourth quarter to begin to drive strong, positive free cash flow through 2024 and beyond. Years of underinvestment in the oil field, combined with operator demands for better reliability in the field and improving cash flow for our customer base, should drive our oil field service customers to more normalized levels of maintenance, spending, and reinvestment in their asset bases. More efficient manufacturing operations and a fully healed supply chain, together with a higher margin backlog converting into revenue, will drive better incremental margins. All these things will contribute to improving financial results for NOV as we work to provide the global energy industry with the technologies and customer service for which NOV is so well known. Before I turn it over to Jose for more detail, I want to thank the NOV employees listening today for all your hard work and diligence to take such great care of our customers, as well as each other. Two of the best examples that I can think of are Kirk Shelton and Isaac Joseph, whom I have enjoyed working with for many, many years. Many thanks to both you guys, and I wish you all the best. Jose? Thank you, Clay. NOV's consolidated revenue totaled $2.185 billion in the third quarter, an increase of 4% sequentially and 16% compared to the third quarter of 2022. Revenue from international markets grew 11% sequentially, offsetting a 6% decline in revenue from North America. EBITDA for the third quarter totaled $267 million, or 12.2% of sales, representing an incremental flow-through of 24% sequentially. We're in the early phases of our $75 million cost savings plan and realized modest savings during the third quarter. As we noted last quarter, we expect the majority will be captured in 2024, helped by the additional restructuring efforts Clay discussed. We generated $40 million in cash flow from operations, with working capital continuing to be a use of cash. As anticipated, receivable days increased slightly with a shift in our business towards international markets. Inventory also increased as vendors have continued to debottleneck their operations and make deliveries earlier than originally planned. However, we believe our inventory build crested in August. The timing of these deliveries also contributed toward the $82 million sequential drop in accounts payables, which further impacted cash flow in the third quarter. We expect working capital metrics to improve from here, leading to healthy free cash flow in the fourth quarter and setting up a very strong free cash flow year in 2024. Our Wellbore Technology segment generated $799 million of revenue during the third quarter, a decrease of $5 million or less than 1% compared to the second quarter, and an increase of 8% compared to the third quarter of 2022. Improving international activity and market share gains have offset lower drilling activity in the U.S. Despite the slight sequential decline in revenue, EBITDA grew slightly to $166 million, or 20.8% of revenue. Our ReedHycalog drill bit business posted sequential revenue growth in the mid-single digits, driven by continued growth in the Middle East, a strong recovery from the spring breakup in Canada, and continued market share gains in the U.S. Despite U.S. drilling activity levels that have declined 16% since the fourth quarter of 2022, ReedHycalog has increased its revenues in the U.S. for three straight quarters. Our new cutter technologies continue to deliver better drilling performance and record bit runs, driving market share gains while commanding premium pricing. Our Downhole tools business reported revenue growth in the low single digits with strong incremental margins. The strong seasonal recovery in Canada and continued gains in the Middle East and Latin America more than offset bottoming activity in the U.S. Despite the unit posting a slight sequential decline in overall U.S. results, revenue from our drilling motors business in the U.S. grew 3% sequentially against a 10% decline in drilling activity. Record runs and strong performance from new products is fueling demand for our drilling motors, which has continued to exceed supply, with operators increasingly preferring our Series 55 motors, along with premium power sections, a combination that delivers stronger drilling performance in some of the most challenging drilling environments. Our Well site Services business reported low single-digit revenue growth with strong incremental margins. The improved results were driven by growing demand for solids control and managed pressure drilling services and equipment in the Middle East and offshore markets, which more than offset softer demand in the U.S. and Latin America. New product offerings like our InnovaTherm solids waste control units and our growing suite of new MPD technology have positioned this business particularly well in light of climbing international and offshore activity. Our Grant Prideco drill pipe business posted a double-digit drop in revenue, with outsized EBITDA decrementals after a very strong recovery in the second quarter. Over the course of the year, we have seen our mix shift from North America to international land and offshore markets. We expect this internationally oriented revenue mix to continue into the fourth quarter. However, based on customer inquiries, the outlook for orders in the U.S. may improve sooner than we'd normally expect, likely reflecting expectations for higher levels of drilling activity in 2024. Our Tuboscope business unit posted a slight sequential increase in revenue, achieving its 12th straight quarter with top-line growth. Strong demand in the Eastern Hemisphere offset softer activity in the U.S. and Latin America. The unit realized stronger demand for pipe coating services and our TK- Liner products across the Eastern Hemisphere, where activity remains strong. While lower drilling activity in the U.S. and higher industry inventory levels of OCTG reduced demand for inspection services at steel mills and outside processors. Our M/D Totco business's results in the third quarter were flat, with its record results in the second quarter. Revenues from drilling surface data decreased sequentially due to lower drilling activity in the U.S. and strong Q2 sales of capital equipment in the Far East that did not repeat, partially offset by higher activity in the Middle East and Canada. Lower revenue from drilling surface data were offset by another strong increase in revenue from our eVolve wired drill pipe drilling optimization services. During the quarter, we helped a major operator in the North Sea shave more than 30 days from its drilling plan for a well on the Norwegian Continental Shelf by utilizing our wired drill pipe optimization and visualization tools, which are starting to see significant interest in the Middle East. We estimate the significant improvement in drilling efficiencies saved our North Sea customer more than $15 million, substantially improving its wells' economics. For the fourth quarter, we expect continued strength in international and offshore markets will more than offset bottoming U.S. land activity, resulting in revenue for our Wellbore Technology segment increasing 46%, accompanied by incremental margins in the low-to-mid 20% range. Our Completion and Production Solutions segment generated revenues of $760 million in the third quarter of 2023, an increase of 1% compared to the second quarter and an increase of 12% compared to the third quarter of 2022. EBITDA for the third quarter was $67 million, or 8.8% of sales, down $2 million from the second quarter and up $11 million from the third quarter of 2022. While our CAPS segment's results were essentially flat sequentially, and drilling and completion activities remained subdued in North America, positive momentum in international and offshore markets helped us drive an 18% increase in orders to $530 million, resulting in a book-to-bill of 114%. Backlog at the end of the third quarter totaled $1.626 billion. We've remained disciplined on what projects we take and continue to insist on driving pricing higher, resulting in the addition of margin-accretive projects into our backlog, which will result in higher margins for the segment as we move into 2024. Our Process and Flow Technologies business unit posted a low-teens sequential increase in revenue, with solid EBITDA flow-through, led by accelerating progress on new higher-margin projects in our Wellstream processing operations. We continue to pursue a large pipeline of potential offshore projects for our Wellstream and APL businesses. While some operators remain cautious, others are moving projects forward. We're seeing a sufficient number of quality opportunities advance that are allowing us to remain extremely disciplined with our pricing to drive better margins in our backlog, while still posting a book-to-bill near 100% in the third quarter. Our Subsea flexible pipe business posted results that were effectively in line with the second quarter, but orders more than doubled sequentially, achieving the unit's highest order intake since 2015. While it has taken some time for customers to recalibrate their expectations and the unit is still working through lower-margin backlog, our disciplined approach related to which projects we're willing to take and at what price is beginning to pay off. Our efforts, along with growing demand from Brazil, West Africa, Australia, and the North Sea, are allowing us to book projects that have much healthier margins and more favorable milestone payment terms than those booked over the last several years. Our XL Systems conductor pipe connections business posted a low single-digit sequential decrease in the third quarter after a robust increase in revenue during the second quarter. Orders remained strong and book-to-bill was over 100% for the fifth straight quarter, led by demand from West Africa and the North Sea. In addition to the unit's success in its core offshore market, the business continues to seek growing opportunities in geothermal markets and recently completed the first sale of its new X-Calibur gas-tight threaded connector to a geothermal customer in California. Our Fiber Glass Systems business posted a low single-digit increase in revenues during the third quarter. Solid growth in oil and gas markets, led by the Middle East, more than offset slightly softer demand from industrial and fuel handling markets. The outlook for this unit remains bright, with growing demand for new corrosion-proof composite pipe products from international oil and gas markets. We also continue to see meaningful opportunities to supply our new flame and smoke-resistant composite ducts for semiconductor manufacturing plants and to support the lithium mining and processing space. Our Intervention and Stimulation Equipment business realized a double-digit sequential decrease in revenue, largely due to lower deliveries of pressure pumping equipment, partially offset by higher shipments of process and wireline equipment. While drilling and completion-related activity in the U.S. continued to soften during the quarter, order intake remained solid, with the business unit posting a greater than 100% book-to-bill, underpinned by demand for our new eFrac products. Demand from international and offshore markets remained solid, and customers in North America remained focused on replacing and upgrading their asset base with more operationally and energy-efficient equipment. During the quarter, we booked orders for 25,000 hydraulic horsepower of eFrac equipment and three of our PowerPod systems that enable hybrid fleets, where eFrac equipment works alongside conventional assets, making it easy for customers to begin capitalizing on the efficiencies of our eFrac technology as they replace their conventional pumping units over time. Despite the perception that there is much excess completion equipment in North America, demand remains steady from technology-driven customers, as evidenced by the eFrac order. Demand from technology-forward customers is not limited to pressure pumping, but also applies to wireline and coiled tubing equipment. In the third quarter, we sold four of our i-Max wireline units and two high-spec coiled tubing spreads that are fully equipped with our latest controls and utilize our new digital Max completions platform to deliver process, machine, and control data to provide superior service at the wellhead. NOV's technology leadership is second to none, which is also reflected in our team being selected by a major IOC to engineer the industry's first 20,000 PSI pressure control equipment for use in completion and intervention services in the Gulf of Mexico. For our Completion Production Solutions segment, we expect continued improvements in offshore markets will more than offset bottoming activity in North America, resulting in sequential revenue growth of between 2%-4% in the fourth quarter. Additionally, a better mix of higher-margin business and cost savings should result in a 100-300 basis point improvement in EBITDA margin, which should reach into the double digits for the first time in three years. Our Rig Technology segment generated revenues of $686 million in the third quarter, an increase of $80 million or 13% sequentially. The strong growth was driven primarily by an increase in deliveries of capital equipment packages, greater progress in projects, and an increase in sales of aftermarket parts and services. Adjusted EBITDA increased $29 million to $100 million, or 14.6% of revenue. The strong incremental leverage of 36% was driven by a more favorable sales mix, with improved output from our aftermarket operations, as well as progress on cost reductions. New orders totaled $178 million, and we also received a $145 million inflationary price adjustment related to the new rigs for Saudi Arabia, resulting in a total of $323 million added to our backlog. When netted against Q3 shipments of $248 million, the segment's backlog increased by $75 million sequentially to $2.968 billion. The bulk of the segment's capital equipment orders were to upgrade or replace various rig components for offshore and land rigs. We also saw increasing demand for our new automation and robotics technology due to its ability to enhance well site safety and improve drill floor efficiencies. While orders for rig capital equipment remained muted, we're growing increasingly optimistic that dynamics in the offshore drilling markets will continue to improve, driving additional demand for capital equipment sales. Our aftermarket business delivered strong results in the third quarter, up 10% sequentially and up 46% year-over-year. The sequential growth was driven by a 12% increase in spare parts sales. Accelerated deliveries from our vendors allowed us to ramp our throughput and begin chipping away at our backlog of orders. While total inventory increased, we were able to ship a large amount of spare part packages and assemblies that were awaiting missing components, which was reflected in a 25% sequential reduction in the segment's work in process inventory. We expect our shipments will continue to grow during the fourth quarter, and combined with lower deliveries from our vendors, should drive both improved profitability and cash flow. Beyond the fourth quarter, the outlook for our aftermarket business, which now comprises 56% of Rig Technology's mix, is strong. Customers are digging deeper into their stacks for rig reactivations. Active rig fleet is aging, driving larger opportunities for our aftermarket operations. We're seeing this play out in our backlog of reactivation, upgrade, and recertification projects. Excluding projects with a scope of less than $2 million, in the first quarter, we had $199 million in active projects with an average cost of $9 million. In the second quarter, the total value of projects and execution increased to $316 million, with an average price of $11 million. In the third quarter, the total increased to $404 million, with an average price of $14 million. We expect the combination of a growing number of actively working offshore rigs and continued reactivations will continue to support a healthy environment for our aftermarket business. I next want to take a moment to highlight the importance of the duration of contracts between our offshore drilling contractor customers and their E&P operating company customers. Over the recent past, we've seen our offshore drilling contractor customers reset and repair their balance sheets, supported by rapidly improving day rates. To date, any rig reactivation or upgrade has been supported by operator contracts that provide mobilization fees, higher day rates, and a duration sufficient to reach a payback on the meaningful investments required to get stacked rigs back to work. However, despite all the contracts that have been announced over the past two years, most of the fleet remained on short well-to-well contracts, and it wasn't until recently that the average duration of contract for the active drillship fleet exceeded one year in length. In fact, average duration of high-spec drillship contracts signed from 2015 to 2022 was about eight months. Today, it is pushing well beyond a year. Similarly, semis and jackups are also seeing meaningful extensions of average term. This is important because it drives drilling contractors' investment decisions on capital expenditures. We believe that with extending visibility of healthy cash flow backed by contracts across the offshore drilling fleet, contractors will become more willing to buy upgraded equipment and reactivate rigs without contracts in order to improve their competitive positioning for upcoming tenders in which they can secure work over longer time horizons. We're already beginning to see signs of this taking place. In the jackup market, the supply-demand dynamic within the high-spec asset class continues to tighten, with leading-edge high-spec day rates now eclipsing $170,000 a day, a level above which new builds become possible. While we don't anticipate any of the established drilling contractors to place orders anytime soon, as Clay referenced, three NOCs have made serious inquiries into current new build pricing, shipyard availability, and construction timing. In the offshore wind market, the impact of higher interest rates and cost inflation is challenging the economics of certain high-profile projects. Therefore, it's not surprising that wind installation vessel contractors deferred tenders during the quarter. Despite the recent challenges, there is still a projected shortfall in vessel capacity needed for projects that have been sanctioned, which is driving constructive conversations with multiple contractors. While we did not book a new wind installation vessel during the quarter, we did receive an order for an offshore cable-lay vessel equipment package from a European contractor, who will use their new vessel to install critical infrastructure for offshore wind development. We believe this award supports the view that the build-out of offshore wind will continue to advance once expectations on project economics are reset. Looking forward, for our Rig Technologies segment, we believe steadily improving market conditions and manufacturing throughput will drive improved financial results for the segment. For the fourth quarter, we expect revenue to increase between 1%-3%, with EBITDA flow through in the low- to mid-30% range. For consolidated company results, we believe building momentum in numerous offshore markets, including rising exploration activity, along with continued growth in the Middle East, will more than offset soft North American land activity, enabling EBITDA to reach the $300 million range, with much improved cash flow in the fourth quarter. With that, we'll open the call to questions. Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster. Our first question is gonna come from the line of Jim Rollyson with Raymond James. Your line is open. Please go ahead. Good morning, gentlemen. Thanks for all the- Good morning, Jim. - detail, as usual. Clay, both you and Jose kind of called out something you've been talking about, which is, you know, on the flexible side, one of your competitors yesterday talked about receiving large orders here recently. Obviously, I think part of your strategy, as you've talked about, is, you know, tied not just to that business, but in general, to watching the industry order uptake, watching what's going on with capacity in certain markets, and obviously, kind of waiting it out to enhance your margins over time. Kind of just curious, you know, your view on how that's playing out. You also mentioned lower margin backlog that gets replaced with some of these higher margin orders and going forward. Just kind of curious how that also plays out in terms of timing of margin improvement as you think about it. Yeah, Jim, I'm gonna address that sort of more broadly than just flexibles. But the pattern that we see within our Completion and Production Solutions backlog, about two-thirds of that backlog are longer term sorts of contracts. You know, sort of 18 months on average to turn, and in the past, have had levels of inflation protection baked in and so forth. And contracts and flexibles and other project-driven sorts of work that we do are characterized that way. What we experienced through the pandemic downturn and the disruptions that we faced is the inflation. You know, you never can protect everything. And so we ran into some a lot of margin pressures, frankly. And so what we're trying to do is those contracts signed in 2020 and 2021, you know, burn off quarter by quarter, is replace that with higher margin work. And that's sort of the strategy that I think both Jose and I laid out in our prepared remarks. And I think we're moving into a period as the offshore, in particular, gets back to work, rising FIDs. We're all seeing higher demand across the space. I think that can be a good tailwind for the next couple of years, is high grading our work, high grading our work to be higher margin as a result of that strategy. Makes perfect sense. Then just as a follow-up, on the North American side, obviously, that's been a bit of a headwind here in the last couple of quarters, and seems like we're in the bottoming process here. Yet interestingly, you still, in some areas, like the newer technology side on the eFracs and what have you, are picking up orders. But curious how you think that plays out as the market likely starts to recover through at least next year. Yeah, good question. I think, third quarter, and as we move into the fourth quarter, recovery hasn't been quite what we or our customers had hoped for North America. But, you know, when I look into 2024, as E&Ps reset their budgets, as, I think as, drillers get more visibility into natural gas, supply-demand dynamics, given that the United States is increasing its, LNG export capacity, in 2025, and, you know, another 6.5 BCF per day, I think that's gonna prompt a little more drilling. Plus, hopefully, a continued, constructive, oil price, you know, once the dust settles on these mergers announced for North America. I hope that's a better backdrop for more drilling in 2024. I know we have a lot of customers that kind of see it that way, and we're all sort of pulling for that to play out, as we get into 2024. Great. Thanks, and look forward to the improvement in free cash flow. Good. Thank you, Jim. We do, too. Thank you. And one moment as we move on to our next question. Our next question is gonna come from the line of Arun Jayaram with JP Morgan Securities. Your line is open. Please go ahead. Yeah, good morning. Clay, you highlighted a 5% sequential increase in capital equipment orders, yet the Rig Tech book-to-bill is a bit below one. You know, clearly, aftermarket is driving that. But I was wondering if you could help us just think about the mix of aftermarket, you know, as we get into next year. I think Jose mentioned 56% of Rig Tech now is aftermarket, and just maybe the margin implications from that. Yeah, I think so. I think this is gonna be a good tailwind as well. We're kind of seeing the supply chain log jam clear itself this year. We're now getting, as we talked about on prior calls, Arun, castings and forgings and parts that we need, that's moving through our systems now. That was a good tailwind that lifted rig aftermarket 10% sequentially and lifted it 46% year-over-year. I think we're gonna continue to make progress in that area, and that'll be a really good thing for rigs margins. With respect to capital equipment, again, kind of echoing what I said earlier, we're remaining disciplined on pricing. But as you know, we all know, our customers are remaining very disciplined on their CapEx expenditures as well. We're hopeful that begins to turn. And, you know, inevitably, we know our customers are gonna have to reinvest in their rig fleets, and rig will gain a benefit from that. Plus, you know, we're kind of watching the wind turbine installation vessel demand picture here closely, softened a bit the last six months. I think our last vessel order was in Q1. The good news is we continue to be engaged in some conversations with our customers here for markets outside the United States. To sum it all up, I do think you hit on the right theme. Aftermarket growth here, the next few quarters, is really gonna drive rigs results. Okay. And just maybe a question. We listened to Nabors call yesterday, and they mentioned about some teething issues with the Saudi Arabian new build program, maybe pushing some deliveries a little bit. Can you just give us an update on what's going on there, and just thoughts on any impact to you as we think about, you know, next year into 2025? I know - go ahead. I'll be honest with you, Arun. I was actually puzzled by their comments. And also looked back at their second quarter and first quarter comments, where they said that the rigs are performing very, very well. And last quarter, Q2, 90 days earlier, they noted we were delivering milestones on time. What I would tell you is, I'm very, very pleased and proud of the execution. Our joint venture in Saudi Arabia has been doing. We've got a joint venture there with Aramco. We built a wonderful facility. It's in a remote location, and we're waiting for the grid to catch up to us, and actually been running off a generator power for the last two years. But in spite of that, the first four rigs that we built were all delivered on time, in accordance with our contract. Rig number five was manufactured on time in August. Our customer came out and witnessed our endurance test, which is part of the factory acceptance testing that we do with all of our rigs, anywhere in the world, and signed off on it on August 30th. And so the rig's been available to pick up since August 31st. Unfortunately, here we are, 60 days later, and they have not yet picked it up. So I don't quite know what's going on there, but just wanna emphasize that our team there has done a terrific job, delivering on time, on budget, and I'm very proud of the great work that they have all done. Great. Thanks for the clarification. Appreciate it. You bet. Thank you. And one moment as we move on to our next question. And our next question is gonna come from the line of Stephen Gengaro with Stifel. Your line is open. Please go ahead. Thanks, and good morning, everybody. Stephen. Two for me. I think I'd start, Clay, you mentioned in your prepared remarks, you kind of alluded to new builds being a long way off. And I was just curious, kind of what your take is on the potential for new build deepwater rigs over time? And maybe as part of that, any sense for kind of, what's in sort of the idle bucket that, you know, still... Any idea for the number of rigs, which could realistically come back to the market before we'd see something like that? Yeah, with respect to reactivating rigs, and I'm gonna stay focused on offshore, Stephen- Yes. I think that's the context of your question. You know, we're kind of getting to the bottom of the barrel, frankly, on rig reactivations, new construction, projects that were suspended through the past decade, that are but have been restarted. And so those opportunities are becoming less and less. And with respect to those individual opportunities, as Jose pointed out, kind of rig by rig, it's taking a lot more money and capital to get those rigs back into the fleet and serviceable, because they've been stacked longer. And so the revenue opportunity per rig has been going up for NOV as we start reactivating more rigs. Moving to new builds, it's getting to be an interesting time. I do think we're ways off from compelling new build economics, and that would require day rates to take another leg up, and probably a substantial leg up from where they are today. And I would add, there's additional headwinds in addition to returns, which are one, you know, Asian shipyards kind of got burned out of the last super cycle and ended up with projects that weren't completed and customers that went bankrupt. Two, so they're gonna be a little more hesitant to take these. Demand higher margins. Two, they're pretty busy with a rising book of business for FPSOs, LNG vessels, wind turbine installation vessels, and other things. I think banks are probably a little hesitant to lend into this. But I guess what I would underscore is that's not necessarily unique to for prior upcycles where the industry faced expensive capital and difficulties with capital. And eventually, what happens is, as these assets are fully utilized and very expensive, it's the oil companies that really need assets to prosecute their development aspirations, and they're the ones that jump into the scene and start prompting either startups or incumbents to start thinking about adding capacity. And would love to tell you when that will happen, but gonna beg off, I don't know when, but you know, it's not next quarter, it's not next year. But I think you know, if history is a guide, it's sort of, it's not if but when. And so, that's just the way the cycles kind of play out here in our space. Great. Thanks for the color. And then, my follow-up, and I know you don't want to look too far ahead of the fourth quarter, but when we think of next year, we think of, you know, maybe a modest rebound in U.S. land and kind of what seems to be this consensus from at least the large service companies around double-digit international growth. In that context, how do you think your revenue performs? You mentioned the outperformance on the top line relative to them over the last couple of years. Just curious your take on that. Yeah, we, you know, we feel pretty good. Again, quarter by quarter, we're getting more E&P companies interested in the technologies that we can bring. As we all know, they're at the top of the food chain here in the oil field, and certainly getting busier in offshore and in international markets. And I think as an organization, we've gotten a lot closer to national oil companies, to to IOCs, and they're liking what they're seeing. So I, I, you know, I think, I, I think next year will be good. We're actually in the middle of our annual planning process now, and so I'm gonna not wrap numbers around that, but I think the outlook for 2024 top line growth continues to be very strong. Great. Thank you. Thank you. Thanks, Stephen. One moment for our next question. Our next question is gonna come from the line of Marc Bianchi with TD Cowen. Your line is open, please go ahead. Hey, thank you. I'm curious about the new segmentation and how you expect that to drive better results. How are you gonna define success there? And, are there any targets that you'd be willing to share with us? Yeah, it's a good question, Marc. First, for us, success is always financial, right? We're a public company and very focused on returns on capital, margin efficiency, and the like. The reason for the move is that the role of our segments here at NOV have always been to coordinate the cooperation between our business units, our product lines, to enable them to use shared services within our organization, and you know, lots of examples of that. But for instance, Wellbore Technologies, that segment was able to coalesce a lot of manufacturing activities across multiple business units several years ago to drive efficiencies. When you go from three segments to two segments, we're kind of rearranging some business units within that, and I think it's gonna give us opportunities for even greater cooperation across product lines and business units, and avail ourselves of more benefits from shared services and the like. So we're believe that's gonna contribute to more efficient operations in the future. It's part of our $75 million annual cost reduction program that we talked about last quarter, and thinks ultimately this is gonna make us better, but the right measurement is gonna be financial. Okay. Jose, you had talked about healthy free cash flow in the fourth quarter and very strong in 2024. Can you put some—maybe put some brackets around that or help us understand, you know, what that translates to in dollars, maybe on a conversion of EBITDA, or however you want to talk about it? Yeah, sure, Marc. So yeah, we were intentionally vague on that this time around, because obviously we've been struggling a little bit from a free cash flow perspective this year for both good and bad reasons. When I say good reasons, one, the business has had better top-line growth than we anticipated coming into the year, particularly from international and offshore markets, which have longer cycle times and the downside of it is consuming more cash tied up in AR and inventory. The other piece that's both good news and bad news relates to our challenges with inventory. The good news is that the supply chain has continued to get better and better. Vendors are accelerating deliveries to us. Bad news is obviously the impact that it has on our inventory growth and the cash consumed by that. But as I said, in our prepared remarks, inventory, we believe, peaked in August and has started trending down, and that will help support, healthy free cash flow, going forward. And so, you know, look, if you look at our, you know, current working capital metrics, and we'll start with the one simple high-level one, which is, working capital as a percentage of revenue run rate, finished the quarter at about 33%. You know, if you just sort of, look back to where we've been historically in the not-too-distant past, we're down to 25%, but let's not get overly ambitious. We'll call it, if we get back to, you know, 27.5%, that immediately frees up $480 million in cash. So, you know, last quarter, I think I said, we should see at least 50% conversion of EBITDA to free cash flow next year. Still think that is easily achievable. Obviously, the free cash flow break even for Q4, I think is a bit ambitious at this point. It's not completely out of the question. Look, if you go back to 2019, you know, we had in the fourth quarter of 2019, we had $473 million in cash flow from operations. If you assume we did the same thing there, we'd fall about $50 million short on sort of that target. But realistically, I think we'll probably have, you know, best estimate free cash flow in the fourth quarter, somewhere between $100 million and $300 million. But as we've seen, and frankly, as some of the big three service companies have talked about in their conference calls, pinning down free cash flow in one quarter is a pretty difficult thing to do, highly dependent on the timing of customer payments and other things that come along. But at the end of the day, we're in it for the long term, and long term, we think we're right on the cusp of shifting over to generating extremely healthy free cash flow going forward. That's great. I appreciate it. It's tough to call, so thanks very much for all the commentary on it. Thanks, Marc. Thank you. One moment as we move on to our next question. Our next question comes from the line of Kurt Hallead with Benchmark. Your line is open. Please go ahead. Hey, good morning. Morning, Kurt. Kurt. So, hey, Clay, I'm really curious, right? As the cycle evolves, and you guys kind of outlined the, you know, historical dynamics of, you know, what your customers tend to do, how they behave, and kind of what drives their decision making, and then how it has a positive impact on your businesses, right? But, you know, you guys have, like, a number of different product lines, you know, across a lot of different areas. And I'm just kind of curious, as this cycle evolves, you know, what is the thing that gets your organization most excited? Like, for example, you know, in the prior cycle was, like, a new, like a new top drive and, you know, along those lines, right? So what, what are the two or three product lines that you think are really gonna be difference makers? It's a great question. I think edge computing, condition-based monitoring, control systems, the whole digital space, we've come out with so many new products there, and we're seeing really good traction. In specific application of those digital products, with our wired drill pipe hardware, Kurt, coupled with managed pressure drilling, I really think we're pioneering a whole new way of drilling that, you know, 10 years from now, 20 years from now, let's say, you're gonna see on most rigs. And the customers, you know, a great stable customer base in the North Sea, putting this to work with really good results. You know, seven or eight customers there. We've got four customers in the Middle East, running, getting ready to run trial programs. Super excited about that. Our products that reduce emissions, including cuttings waste management technologies, a lot of interest in the Eastern Hemisphere as operators tighten their cuttings disposal requirements and reduce the oil on cuttings that they're willing to tolerate. And so that requires a lot of NOV technology. We've got new automation products that are, you know, a couple of dozen customers are looking at, and the first version of that's running for an offshore driller in Brazil. The first land version of that's gonna be operating very soon as well. You know, just across the board, we put a lot of really creative thought and ingenuity and innovation into our product portfolio, really kind of outside the whole capital build thing. And, that's what's been driving the top line growth the past two and a half years, and I'm super excited about all that. Also excited about, you know, the old, the good old, rig iron that we make, and the new versions of that, like eFrac. And so that—but, but across the board, the level of creativity and innovation in this organization just amazes me every day. And we've got real solutions for our, our, our customers to make their operations more efficient, safer, and lower emissions. And I, I think that's what's gonna drive NOV's fortunes, while the sol—the capital equipment dynamic, remains, as I've mentioned in my, remarks, more optionality at this point, but on the whole, we're looking forward to, the next few years. That's great. That's great. So one other thing, all right. So I guess one thing I'm very curious about, and you kind of referenced this concept about, you know, offshore drillers potentially being willing to activate rigs without contracts. Is that your sense of how history may repeat, or are you getting indications from your discussion is that, that's actually gonna happen? No, not yet. I would say not yet. We're not seeing that just yet, but our point was longer term contracts, and as the market moves towards E&Ps are starting to realize, "Hey, rigs are in short supply here. I better sign up contracts that run a little bit longer than I previously could," which is in contrast to, "There's a bunch of rigs out there, it's oversupplied. I'm just gonna go well to well," which has dominated the prior decade. We think could change their thinking, but right now, everybody's very capital disciplined, and understandably so, coming out of the last ten years and all the financial challenges we've all been through. But again, if history is a guide over time, and shortages of equipment and high margins that are earned by the people that own that equipment can change that thinking. Yeah, and Kurt, I'd add that, you know, while we're not seeing that take place, there are conversations where customers are getting a little bit further ahead in terms of planning and preparing, and starting to do small things around the edges to get ready to go sooner rather than later. Gotcha. But look, if I may, may squeeze one more in, because you referenced it earlier about, you know, what, how do you, how do you gauge success on, you know, this restructuring and so on, right? So, so maybe we can, we can talk about it in this context. You know, how, what type of incremental margin, would you then equate to success, right? In the past, you've given some updates on incremental margins through different business segments on a through-cycle basis. So maybe we can kind of throw that out there and say, you know, what are the incremental margins that you would see-- want to see achieved in these new segments to say, "Hey, we're successful? Yeah. So, Kurt, good question. Tough question. But really, you know, outside of kind of what we've really accomplished with Wellbore Technologies here to date in the cycle, you know, we obviously haven't been extremely satisfied with the incremental margins that we've delivered. So part of this restructuring, part of the cost-out program, part of the sort of doubling down our efforts to make sure that we're extremely disciplined in knowing what type of opportunities that we're gonna have to drive price higher, revolves around trying to drive those incremental margins higher. And so, you know, I think those same through the cycle, incremental margins apply. Same things that we've always talked about, but as we've also always talked about, different points in the cycle, they can be above other parts of the cycle, they can be below. And so, as I mentioned, to date, some of those have been below over the last couple of years, and our aim here is to accelerate getting them to be above the sort of average expected through cycle incremental margin. That's good. Really good. Really, really appreciate that. Thanks. Thanks, Kurt. Thanks, Kurt. Thank you. One moment for our next question. Our next question comes from the line of Ati Modak with Goldman Sachs. Your line is open. Please go ahead. Hi, good morning, team. Just to follow up on some of the questions from before on free cash flow, maybe any color you can provide on the cadence, because it sounds like the conversion is improving, but should we still see impact of working capital seasonality to start the year next year? And then, what metrics are you looking at to inform your capital allocation strategy? Yeah. So from a free cash flow standpoint, yes, we'll continue to have seasonality with Q1 typically being a more challenging cash flow quarter, but then we expect it to improve throughout the course of 2024. And I'm sorry, I didn't catch the second part of the question. Oh, capital allocation. Was that your question, Ati? Yeah. Yeah. What I would say is, we with stronger free cash flow in 2024, I'm hoping, well, that should open up opportunities to return more capital to shareholders. We have a, I think, a pretty strong track record here, having returned almost $5 billion since 2014 through both share backs, share buybacks and dividends, as well as continuing to move forward on our organic growth opportunities. And as we always do, we're gonna keep an eye on M&A opportunities. But I think the looking forward into 2024, really focused on allocating between those three areas. That's great. And then curious if you're seeing any conversations around new build frac fleets at all, particularly given the strength in pricing and pressure pumping has been very strong this year, despite activity declines. Anything that you could share there, what could that mean for NOV? Yeah. Yes, we are having inquiries around new frac fleets. A lot of that, though, I mean, as you know, the frac fleet has a lot of churn in it because it's so consumptive of equipment. And as the industry's moved to greater frac intensity, that equipment's being run harder. And so, yeah, we're- we've had a number of conversations underway with customers around new frac fleets. What I would tell you is that the interest in electric frac fleets continues to grow. In particular, you know, we noted this quarter some orders for some pumpers and eFrac equipment. And so I think more and more E&P companies are requiring that or are preferring eFrac fleets because they have lower emissions, as well as the pressure pumpers are learning they have lower cost of ownership. And so that's a good opportunity, I think, for, again, NOV's technology to play a key role going forward. Thank you. I appreciate the answers. You bet. Thank you. Thank you. This does conclude our question and answer session, and I would like to hand the conference back over to Mr. Clay Williams for his closing remarks. Thank you, Michelle, and thank you all for joining us this morning. We look forward to discussing our fourth quarter and year-end results with you in February. Hope you have a very nice day. This concludes today's conference call. Thank you for participating. You may now disconnect.