Collin Gerry: On the land rig side, what are you seeing on day rates there?
Daniel F. McNease: It''s flattened out also. All through this period, we''ve remained at 100% utilization. We think that the fact that we''re focused on the deeper drilling has helped us a lot.
Collin Gerry: You''re not seeing too much pressure as far as leading edge rates go?
Daniel F. McNease: No. We''re getting a lot more calls now as far as the deeper drilling. We have a two rigs coming out here the third quarter and we''ve got several different operators talking about them, the fact that they''re 2000 horsepower and can drill the deeper wells and it give us an advantage there. Those are in south Texas, East Texas Louisiana and one or two in Oklahoma.
Thomas Curran (Wachovia): For years, you''ve reported LPI operating profit on a gross operating income basis, and then starting last quarter, you began providing a breakout of cost between direct costs and other operating costs. Can you explain the difference between the two and your reasoning for the shift?
Daniel F. McNease: The reason for the breakout is the fact the manufacturing division is growing so much. Hence we thought we would give more clarity on what it''s doing. As far as the difference between the direct cost and what we would call other, direct is purely the cost of those products that are going out the door where there''s material labor, allocated overhead, etc. The other is primarily engineering, resource, and development and costs like that, which are obviously critical to the process, but they''re not tied to individual sales.
Thomas Curran: The implied run rate margins for some of the new product lines are coming in lower than what you were expecting. Could you speak where you were off there?
Daniel F. McNease: They''re coming in close to what we were expecting. We''ve had a number of hiccups in the last few quarters that have brought the numbers down a little bit, but of course the other thing you''ve got to look at is the level of parts. If you go back in the last couple of years, about half of the business at times was part sales, which have very high margin to them. As we''ve moved into some of these new product, the part sales as a percentage of the total has diminished, and that''s been a little bit of a drain on the profitability, but as we go forward, we''re hoping to move those margins up.
William H. Wells: The gross margin was 26% if you take the Perfadora and trial loss out. We hope to build that margin up between 25 and 30 and that''s what we''ve been doing.
Thomas Curran: Do you expect to receive the jack-up rig kit order for Scorpion''s latest new build order at Lamprell, and are there any other pending laterno new build jackup orders that you would expect to result in rig kit orders?
Daniel F. McNease: We''ve already received the Scorpion kit order for the first Scorpion rig and Lamprell yards. There is options for four or five additional ones, but we have a lot of bids out worldwide right now. We think that we will get some of those. There''s going to be some more additional 116 each built around the world, and we think we''ll be successful in that, but I can''t want tell you exactly how many.
Thomas Curran: On the offshore drilling side, could you provide a breakdown of the 14 tenders on the operator side in terms of who issued them, and then on your side, which jackups are being bid?
Daniel F. McNease: I give you the 14 tenders, but I''m not going to tell you which jackups we''re bidding where. We got three tenders for Ramco, one for RasGas, four for KJO, that''s in the joint venture deal between Kuwaiti and Ramco. We got two from Egypt, we got one from Tunisia, two from Brazil and one from Angola.
Michael Fara (Merrill Lynch): On LeTourneau''s backlog, could you comment on where the decline is coming from? You saw backlog drop almost on a dollar for dollar basis with revenues. Can you help us understand what happened there?
William H. Wells: Basically, if you look at offshore products, there''s a lot of quotes out there, but there haven''t been any kits sold for some time now and so that we''re just working off that backlog in present time. But we''re optimistic that we''re going to get some of those orders and that will start to build again. The drilling systems, there''s a lot of quoting activity going on right now, we''re very optimistic about that. They''ve also worked through some large sales in the last couple of months, whereas, before they were selling individual components like pumps and things like that. Now, they''re putting them together as packages, and depending on shipments, those have a big impact on the backlog.
Michael Fara: In the offshore drilling, a lot of tendered activity on the international side has been led by PEMEX recently. Is there any chance for you to move back into Mexico, especially, for some of your low end Gulf jackups?
Daniel F. McNease: We have those tenders in-house and we''re looking at what all the options are and what we think would give us the best return right now, as far as areas we''ve been working. If we went into Mexico, we''d have to start-up operations there, so we''ve taken that into consideration. But with the day rates that are been paid down here, you should have a look at it.
Ken Sill: On the Gorilla VI contract, can you provide the rate, where that''s working and how long that''s going to be for?
William H. Wells: The Gorilla VI is the one that''s working for Tallsman and British gas. It''s a split deal. The reason that day rate range for the British gas part from 330 to 370, if it''s working in the UK sector, it would be 330, but if it goes into Norway, it could get as high as 370, just depending on what equipment we have to add to the rig. The duration of the deal, with all the options, could be 915 days.
Ken Sill: On the Gulf of Mexico, we''re starting to see some of the smaller rigs going down with no follow on work right here. What''s your roll over timing in the Gulf of Mexico over the next 60 to 90 days?
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