Soma Somasundaram: No, I don’t think there’s anything significant. I mean, there’s always some mixed issues that happens within the businesses. So outside of that, I would say, Marc, there’s nothing of – other than the normal variations due to mix, there is no major any other issues.
Marc Bianchi: Okay. And then Soma, you had mentioned an expectation for growth in entering 2024, but I know typically there’s some seasonality that occurs in the fourth – in the first quarter with PCT falling off. Can you just sort of walk us through the typical progression and if you have any particular insight about early 2024?
Soma Somasundaram: Yes, Marc, great observation because we always see this Q4 to Q1 seasonality, and in the past, we have provided some color around historically how that has worked in our PCT business. So if you look at over the last seven or eight years, the PCT business on an average or at a mean, Q4 to Q1 revenues have declined about 5%, that is a pure seasonality, and some quarters it’s much worse. Some quarters it’s better depending on how Q4 is. So there will be a Q4 to Q1 decline in our PCT revenue, which is seasonally driven. And historically, like I said, it could be 5%. And then but when you look at the DT, Drilling Technologies, we do expect the Drilling Technologies business to rebound in Q1. And again, we have shown historically when Q4 is tend to be the type of Q4, we are expecting Q1 will rebound and typically in some years, it’s a sharper rebound.
But we do expect Q1 to be a good rebound in our Drilling Technologies business. We expect PAT business Q4 to Q1 to be sequentially better as well because the budgets typically reset in the early part of Q1. So normally what we’ll see in the PAT businesses, it’ll start a little slow in January, but as the budget starts getting into place in February, we will exit the Q1 quarter, which are much stronger run rate than when we entered Q1. So in summary, we’ll expect PCT to be seasonally down Q4 to Q1, we expect PAT to be Q4 to Q1 up. We expect a DT to be up Q4 to Q1. And then as we look in the quarter, as we look in the rest of the year in 2024, Q1 tends to be the lower quarter and Q2, Q3 tends to sequentially improve from there. And Q4 as you know, Marc that like we are seeing this year, sometimes we run into these type of issues, but that’s too early to predict what Q4 of 2024 may look like.
But we are confident Q4 to Q1, there’ll be growth and we’ll see growth Q1 to Q2 and Q2 to Q3.
Marc Bianchi: Great. That’s very helpful summary. Thank you.
Soma Somasundaram: Thanks, Marc.
Operator: Your next question comes from the line of David Anderson from Barclays. Please go ahead.
David Anderson: Hey, good morning, Soma. I have a few questions around the North America side of PCT. So the U.S. rig count contracted 20% this year, but if I look on the EIA numbers, onshore production appears to actually increase at least through July. Now you said lower PCT revenue is through the rig count falling, but I thought there was a little bit of a longer term – longer cycle relationship there. Isn’t production related driver here, am I missing something in terms of that side? I’m surprised it was that much of a relationship.
Soma Somasundaram: Yes, Dave, I think let me make sure, we clarify. I think in the slide deck, we had a slide which showed the sequential by segment, U.S. versus non-U.S. So if you look at that, the PCT business actually grew sequentially 6%, where we had the real issues where in PAT and DT in the U.S. land. So this goes to show the long-term relationship and the resilience of our PCT business. So PCT U.S. business grew 6% Q2 to Q3.
David Anderson: Okay, so that held up there better. So it’s the PAT side and the relationship there is the completions with the ESPs. Okay, that makes sense. So if we think about kind of longer term drivers in NAM for PCT, so U.S. onshore is sort of in manufacturing mode. We’re not going to see a whole lot of production growth over the next several years. So how should we think about the drivers at DAM for PCT from here? Is there an underlying kind of increasing chemicals intensity story here? How should we think about kind of growth in this business relative to production over time?
Soma Somasundaram: Yes, Dave, I think that’s exactly right. And even if you look at our continued growth in the U.S. business in PCT, it’s a combination of two things. One is definitely the growth in the intensity. And then the second aspect is Gulf of Mexico continues to grow as well. If you look at our offshore growth, Q2 to Q3, we grew 12% sequentially in the offshore markets globally, and Gulf of Mexico was an important part of that as well. So as we go into 2024, we continue to expect the intensity improvements as well as the Gulf of Mexico growth as well.
David Anderson: So even in a flat – let’s just say hypothetically U.S. onshore production is flat, should PCT still continue to grow with higher basically chemicals to production over time? Is that a trend you’re expecting to see? Okay. And then secondly, and then sticking on U.S. onshore, E&P consolidation is obviously a big theme with Exxon and Chevron. Can you talk about what that means to your business? And I guess I’m curious just how fragmented – we know the offshore business is sort of very moti around that, but how about U.S. onshore, is that more fragmented? And does this potentially create more market share opportunity for you onshore?
Soma Somasundaram: Yeah. I think when you look at this consolidation, so the positive aspect for us is, we have stronger relationships as you know, with the IOCs. And you saw with Exxon, we have – we won the supplier of the year award. So as the consolidation is driven by the IOCs, our presence and our long-term relationship with our IOCs should help us continue to maintain and gain positions in the – in this consolidation. Now the thing we have to really be watching for is to make sure, obviously, as they consolidate the NPs will also look for efficiencies and savings along the way. So – but we do feel given our long-term relationship and given the global way we support our customers in this areas, I think we will see it’ll be a net positive for us.
David Anderson: Okay. So aside from any U.S. onshore production growth, the two main drivers at E&P are going to be increasing revenue – sorry, increasing chemical intensity and market share on top of kind of any other inherent growth. So, okay, that makes a lot of sense. All right, thank you very much, Soma.
Soma Somasundaram: Thanks, Steve.
Operator: Your next question comes from the line of Scott Gruber from Citigroup. Please go ahead.
Scott Gruber: Yes, good morning.
Soma Somasundaram: Good morning, Scott.
Scott Gruber: So, Soma, it does look like your EBITDA margin is going to stagnate here in 4Q given this North American weakness. But if I heard you correctly, I think you mentioned margin expansion in 2024. Can you walk through some of the major drivers for continued margin expansion? And do you think getting back to that that 21% level later next year is a realistic goal? Or do you think you’d do better?
