Ladies and gentlemen, thank you for your interest in what is perhaps a small transaction but on a big trend.

We called this press conference to draw attention to and generate interest in our emerging technology segment and our role in it. We think Managed Pressure Drilling, MPD, will change the way wells are drilled around the world and not just in depleted fields. In our communications we use words like enabling because we have done just that. And for that and other reasons MPD companies are riding a rising wave that looks to become the next big competitive trend in drilling technology.

If you watch the trends then you already know that more than a few of the large oil field service companies are jockeying for position in drilling pressure management. A couple of service companies that started in underbalanced are rapidly migrating to managed pressure drilling. Other companies, like Smith with existing pressure control technology are making strategic acquisitions to strengthen their market position, while others with no pressure control offerings are getting in the game with small company take-overs.

There is a more surprising driving force behind MPD that sets this technology trend apart from recent ones like rotary steerables. And that comes from the E&P companies. Several oil companies, key majors and small independents alike are in the game early as users, technology drivers, and willing early adopters. Their positions are easy to understand given the recent returns they’ve already earned and the future returns they stand to earn in mature fields. Access to stranded reserves – We all like the sound of that. In fact, At Balance received the 2007 Offhore Engineer Acheivment Award for Field Life Extension.

I use the term early adopters because there are a number of MPD technologies that oil companies are applying and moving up a technology staircase – alone and in combination. It is actually safer and more beneficial to drill a well when it is closed and at balance than when it is open and overbalanced. But like all things new in drilling, it takes a course change in the culture to adopt new procedures - especially when you consider the newness of the technology that drillers have to trust to contain the pressure. That’s what Statoil, Hydro, Talisman and Shell, to name only a few are doing – they’re applying the new technology and sticking with it because it has enabled them to drill difficult if not previously impossible wells. As a result, they are mitigating risks of non productive time due to kicks and losses, accessing stranded and new reserves, while increasing safety by applying this proactive technology. This is a new and safer way to drill.

In addition to worldwide infrastructure and best in class products, our partnership with Smith puts us in a position that we believe is ahead of the rest in several critical ways. One is automation, another is experience, and yet another is new product development.

Many agree that the time is ripe for automation in the oilfield. Hardware and software technology have reached a point of development that make it ready for the challenges of real-time pressure control. And that’s where At Balance with Smith leads.

To be sure it didn’t happen overnight. Shell started working on automated pressure control 10 years ago. But we’ve reached a point now where our automated systems can hold pressure within a tolerance too small to do manually and impossible to do conventionally. We did that on recent job in the Andaman Sea where we held pressure to within plus or minus 15 psi. Let’s put that in perspective – that’s about what you feel under atmospheric pressure.

When it comes to experience we have put our technology and people to the test in areas that defied conventional wisdom. Operators have drilled wells in areas where we were the only approved solution due to tight pressure tolerances.

There’s been a lot of talk lately among industry groups about the difference between MPD and UBD. We have to take responsibility for causing some of the blur because of recent work we completed in the south China Sea and in the deepwater Gulf of Mexico. Operators in both places wanted to go after reserves that required them to apply an untried solution – lower the mud weight below pore pressure. That’s a statically underbalanced condition – hence the confusion. But let me make a clear differentiation, we do not invite an influx into the wellbore.

Keep in mind that the mud in the well creates a head of pressure that holds back the pressurized fluid in a geological formation. Lose control of that and you lose control of the well.

But the drilling operators in both areas did in fact lower the weight of the mud below the pressure of the formation they wanted to drill with our system installed to maintain adequate pressure. They drilled the wells without any loss of pressure or mud. This technique represents something of an industry first which has lead other companies to consider as a workable solution.

The third way in which we believe we are driving the MPD trend is in technology development. Early MPD systems were designed for offshore operations which require stringent adherence to marine certifications. While much smaller and compact than typical UBD systems, these types of systems are large and cumbersome for onshore work where mobility, handling, and rapid deployment take precedence.

Working closely with Smith and M-I Swaco we developed an entirely new system designed specifically for the onshore market but with the same level of control used offshore. This system is unique in the market and was recently successfully tested at LSU. The manifold is on display in our booth in the exhibition hall. I invite you to come and have a look.

The new system is on its way to south Texas where an operator wants to use it to manage pressure while drilling with a liner through a depleted gas sand. Liner drilling is still fairly new. This job is an example of the technology uptake I mentioned was going on with MPD technology. It also represents another industry first application that is being watched closely by other operators drilling in the same area.

So I go back to my opening remarks and the claim I made about the size of our transaction. Yes it’s small but At Balance with Smith is driving a big trend.

Read comments made at joint press conference by Bryan Dudman, President of Smith Services Division