Ben Dell (Bernstein): Are there any tax consequences we need to be aware of in the LTI transaction and do you have an estimate of what that would be?
William H. Wells: Depending on what we do, there could be some tax consequences, and that''s one of the things we are considering. Our tax basis in LTI is roughly $500 million and we are trying to structure a transaction that will minimize our tax exposure.
Ben Dell (Bernstein): What could be the best structure for the transaction to have the lowest tax impact?
William H. Wells: Probably a merger into a public company or you get into some complexities between whether it''s taxable for the company and then whether it''s taxable to our shareholders assuming we later spin off our interest in the combined entity. We are actively looking at all those options.
D.F. McNease: We hope to have the process of deciding the direction to take completed by the June 1, 2008.
Kurt Hallead (RBC Capital Markets): Can you give us an update on how you are able to effectively control the steel and fuel costs?
D.F. McNease: The steel costs are phenomenal. If you look at January 1st, a ton of scrap metal in the U.S. was selling around $220 a ton. Currently, it’s selling around $400 a ton. About 55% of the steel is manufactured in the U.S. What has happened in scrap market is if you go up to the East Coast and look at that situation, that scrap is being exported to China and other places and they are getting $640 a ton according to this morning report. That''s one of the things we''ve been dealing with. We’ve got a four-month supply of steel in Longview scrap metal and we just bought some additional scrap last week at $340 a ton. It’s a process of trying to look around and get the best deal you can and the fact that we are more inland at Longview gives us some advantage of buying the local scrap. If you look at the drilling systems and our amount of inventory, we have all the steel in place for the manufacturing needs for the drilling products group. Now if you look at the steel for the rigs that we are building in Vicksburg, we have everything in place ordered and locked in as far as price goes. If you look at passing on the sale of the steel to our customers, we do put a surcharge to all of our customers. They were just buying steel from us and that surcharge is basically changing on a daily basis.
Thomas Curran (Wachovia): When it comes to the possibility of merging LeTourneau with one or more companies, what is your comment on the product lines or technologies that you have come across over the course of your due diligence that are of particular interest?
D.F. McNease: The whole objective would be to grow LeTourneau and that’s what we''ve been talking about for quite a while. If you go back in 2003, you could say that the company has done a good job of that to this point. However, the problem is to grow it internally and we feel it takes a lot of cash from the parent company but we just don''t think we can grow it at the rate it needs to be grown at internally. We are therefore looking at all these different opportunities and the goal would be to become the true alternative to NLV. There are also a few holes in our product line that we need to fill. That''s a process we are going through now looking at different parts, different pieces of equipment, different product lines that we need and see who best has those product lines.
Thomas Curran (Wachovia): What is at the top of your list with regard to those product lines and would it be correct that when it comes to potential mergers, you prefer to do with public companies as opposed to private ones?
D.F. McNease: We''ll evaluate every opportunity available to us. The whole goal has always been to become a true alternative to NLV. There is a huge vacuum there and we see the opportunity to fill that vacuum and we are going to do that over the next couple of years.
Thomas Curran (Wachovia): In terms of your inbound orders, the quarter has been the strongest since Q2 of 2006. On the drilling products and systems side, how much of that was land rig packages and how much was aftermarket parts?
D.F. McNease: If you look at the internationally divested market from land rig orders, most of them are international orders. A lot of them are originating out of the Middle East because that''s where our biggest market is right now. Last year, we talked about this agreement that we signed with Eurasia Drilling in Russia to furnish them rig components for their construction process. They are supervising construction in Russia that''s finally taking place. We got our first order for the first rig this last quarter. They expect to build 10 to 20 rigs a year starting next year. That is having an impact on LeTourneau. If you look at the number rig orders that we have got and the size of those orders, we’ve got eight rig orders this last quarter, which impacted the total backlog. However, we’ve got about six additional orders that we expect to complete in the next seven days, which would be another $91 million to $92 million. Those are continuing to come in and it is amazing the amount of interest that we are getting from some areas like the Middle East. In Australia, we’ve got a bid in right now. We expect to sell another one down there this year. I’d therefore say more than 9% of it is international. The aftermarket part business is less than 10% of that. However, we expect that to grow tremendously in the Middle East, as we continue to focus on building. We see a tremendous market and also the number of land rigs that are working for Aramco.
Thomas Curran (Wachovia): Of that 90% that you said was international, how much of it is land rig package orders?
D.F. McNease: In the first quarter, if you count the rig kits plus the total land rigs, there were 10 total packages and that amounts to about $127 million total revenue.
Thomas Curran (Wachovia): You ultimately aim to retain a 20% interest in LeTourneau. Confirm that doesn''t necessarily mean you would target retaining 20% with the initial transaction?
D.F. McNease: The ideal situation is we would have some percentage of the company going forward. We may have lot more than 20% but if we grow the company that percentage will continue to come down or as we sell our stock off to buyback stockers. Ultimately, three or four years from now, we may not have any ownership in LeTourneau. That will be something that we’ll decide going forward based on strong feedback from shareholders.
Arun Jayaram (Credit Suisse): There are a couple of rigs coming out of the shipyard this year. What is your comment on where you are bidding those rigs out in terms of the day rates so we could think about modeling those in later this year?
D.F. McNease: We are bidding in the Middle East, West Africa and the North Sea. There is also a lot of the interest on the two wells we are drilling in the Gulf of Mexico, one for McMoRan and another for BP. There is a lot of interest from other people about their capability in the Gulf and looking at modeling, if the rigs were to work in the Gulf of Mexico, you would probably be looking at around 190 to 210 range. In West Africa, we are bidding those rigs, 240Cs at about 250. In the Middle East, we are in the 225 range for the 240C and Tarzan about 190. In the North Sea we are in about that same of 250 range.
Arun Jayaram (Credit Suisse): You have nine rigs in the shipyards. Assuming that you were to do an external sale, have you fixed price contracts from a Rowan perspective?
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