Newpark Resources, Inc. (NR)

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Newpark Resources Inc. (NR)

Q4 2008 Earnings Call

February 20, 2009; 10:00 am ET

Executives

Ken Dennard - Managing Partner, DRG&E

Paul Howes - President and Chief Executive Officer.

Bruce Smith - Vice President, International & President, Fluids Systems

James Braun - Chief Financial Officer, Vice President

Analysts

Marshall Adkins - Raymond James & Associates Inc

Mike Harrison - First Analysis Securities

Terese Fabian - Sidoti & Company

Karen David-Green - Oppenheimer & Co

Vijay Singh - Janco Partners

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Newpark Resources, fourth quarter earnings conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

I’d now like to turn the conference over to Ken Dennard with the DRG&E. Please go ahead.

Ken Dennard

Thank you, Michaela. Good morning everyone. I appreciate you joining us for the Newpark Resources conference call today, to review 2008 fourth quarter and year end results. Also I’d like to welcome our internet participants listening to the call as it is being simulcast live over the web.

Before I turn the call to management I do have the normal housekeeping details to run through. For those of you who didn’t receive an e-mail of the release and would like to be added to the distribution list, please call our offices at DRG&E; that’s 713-529-6600 and provide us your contact information or of course you can always e-mail me, which I think most of you have my e-mail address.

There is a replay of today’s call and that will be available via webcast on the company’s web site at www.newpark.com and there is also a telephonic recorded replay which will be available for a week, until February 27 and that information is also in the release.

Please note that information reported on this call, speaks only as of today February 20, 2009 and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay listening. In addition, the comments made today by management of Newpark during this conference call, may contain forward-looking statements within the meaning of the United States Federal Securities Laws.

These forward-looking statements reflect the current views of the management of Newpark, however, various risks, uncertainties and contingencies could cause Newpark’s actual results, performance or achievement to differ materially from those expressed in the statements made by management. The listener is encouraged to read the company’s 2007 Annual Report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, to understand certain of those risks, uncertainties and contingencies.

Also management will refer to adjusted income from continuing operations and adjusted earnings per share. These are non-GAAP financial managers which managements believes are helpful for an understanding of the company’s operations. Please refer to the company’s earnings release to obtain a full reconciliation of these measures comparable to GAAP.

Now, with all that behind us, let me turn the call over to Newpark’s President and CEO Mr. Paul Howes. Paul.

Paul Howes

Thank you, Ken and good morning to everyone. We’d like to take this opportunity to thank all of you for joining us today for our 2008 fourth quarter conference call. With me today are Bruce Smith, President of our Drilling Fluids Business and Jim Braun, our Vice Chief Financial Officer.

Following my remarks, Bruce will provide an update on our Fluids Business and Jim will then discuss our other operating segments as well as the total company results for the fourth quarter and full year. I will then conclude with a discussion of our market outlook before opening the call to Q-and-A.

I would like to begin by first commenting on our environmental services business, or, as we call it, NESI. As you may remember, we had intended to sell NESI to CCS last year, but we mutually agreed to terminate the sales agreement in November as a result of litigation from the Federal Trade Commission. We had previously reported NESI as a discontinued operation. Starting today and going forward, we will be reporting it as a separate operating segment within our continuing operations.

Now turning our attention to the fourth quarter, I would like to emphasize how pleased I am with our financial results in our fluids and NESI businesses during this increasingly challenging environment for oilfield service companies. Despite the decline in domestic drilling activity at the end of the quarter, we grew our revenues by 31% to $227 million in the fourth quarter over the same period last year. Adjusted income from continuing operations for the quarter rose 6% to $10.2 million or $0.12 per share.

In the international markets, our offshore deepwater operations in Brazil are ramping up nicely, under recently signed contracts with major and national oil companies. To support this new market, our Brazilian fluids plant began deliveries to the deepwater market in September, and we were also recently awarded a new offshore contract with another international oil company. The contract that we signed with Petrobras in December is expected to contribute to revenues in the first quarter of 2009. All these developments are strong signs that Newpark is building a reputation as a world class fluids company.

In the U.S., we saw market share gains in east Texas, west Texas and the Rockies, despite a decline in rig count from the peak in October. However, we also saw margin compression. Our fluids operating margins for the fourth quarter of 2008 were 11.7%, down 120 basis points from last year and down 180 basis points sequentially. It is important to note that we have responded by reducing headcount and lowering operating expenses.

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