As we look ahead, our efforts will be squarely focused on integrating and streamlining our operations and support functions, while fully capturing the $40 million of cost synergies that we have identified.
Our anticipated synergy opportunities fall into three general categories.
The first is the elimination of KLX’s legacy corporate headquarters in Wellington, Florida and rationalizing associated corporate functions to Houston. This will result in immediate cost benefits through the reduction of duplicative public company costs, including director and auditor fees and insurance economies of scale, as well as other administrative and support staff expenses, such as accounting, legal, IR and supplementary functions and the elimination of other legacy KLX corporate cost.
We have made excellent progress in realizing these savings, as our corporate functions are being transitioned to Houston and we have either retained or hired new leaders for each of these areas. We currently anticipating closing the Florida office by the end of October at the latest.
The second synergy category is the combination and rationalization of redundant Houston facilities and teams, which accounts for a smaller portion of the overall savings. This represents an additional reduction in duplicative management and associated costs, sales and marketing expenses, economies of scale related to benefits cost, as well as incremental savings in HR, IT and system savings, as well as the consolidation of the Houston corporate office space.
The third category is made up of operational synergies in the area of personnel, facilities and rolling stock. These represent the consolidation of over 20 overlapping facilities, reductions in redundant management, sales, HS&E and other field level support staff within certain geographic basins, where we overlap with legacy QES operations, as well as procurement savings and economies of scale benefits across our operations.
Beyond these three categories, we believe there to be additional sources of upside synergies that we will identify while working through the integration. These include such items as cross-selling opportunities across the organization, leveraging in-house manufacturing and downhole tool expertise from the directional product line to the completion side of the business and the repurposing of legacy horsepower to lower wear, wireline and coiled tubing operations and support.
Beyond these, there’s also the opportunity to enhance vertical integration by leveraging QES’ trucking and machining capabilities to reduce KLX’s transportation and tool cost. In short, there are significant value creation opportunities in the near-term that can be initiated to better position the organization for the future. From a macro view, conditions in the market remain very tenuous.
Although there are some signs of an improvement amid the weakness.
As Keefer stated, it was an extremely challenging second quarter. Rig count declined approximately 40% from the end of our first quarter and frac spread activity bottomed somewhere around 40 to 50 spreads according to industry estimates. Similar to Q1, market demand for our services remains challenge due to the COVID-19 pandemic and macro supply concerns. We begin to see an uptick in activity at the end of the quarter and early into the third quarter, particularly on the completion side of the business, but the ultimate extent of the duration of the impact of COVID-19 on the global economy is unknown.
So far, completions activity is leading the way in the recovery, but we have recently seen rig count increase 10 rigs off the bottom. And we believe our diverse product and service offering uniquely positions KLX to respond to a rapidly evolving marketplace, where we can provide a comprehensive suite of engineered solutions for our customers with one call [ph] and one MSA. In response to the current market conditions, we’ve reduced our capital spending by approximately 60% in the first-half relative to our budget, and are on track to cutting capital spending by more than 50% year-over-year. With North American operators reducing or suspending activity and CapEx being cut in response to unfavorable commodity prices and pandemic-related demand destruction, there has been far too much uncertainty to predict the timing of a recovery.
However, we are seeing that the completion services have been the first to reflect an improvement in the market activity, as operators have focused on completing their backlog of DUC wells from earlier in the year.
In terms of our own visibility on activity, we’ve seen an uptick in July, and the August and September months have shown a notable increase in scheduled work, particularly for completions-related projects as the completion of DUC wells will drive demand for coiled tubing, technical services, as well as rentals.
However, I would reemphasize that this may merely be a transitory uptick as the outlook for the fourth quarter remains opaque at best, and there remains a good deal of overhanging concern from our clients regarding 2020 budget exhaustion. With that said, we’re working to realize synergies and reduce our cost structure and hope to exit the year on at least a $30 million synergy run rate.
Finally, let me emphasize that we remain committed to growing the business, while maintaining a conservative balance sheet and a returns-focused mentality. And we continue to believe that industry consolidation is an ideal means to achieve this goal.
As such, we will continue to remain active in pursuing consolidation opportunities and we’ll prioritize those that have a strong strategic fit and/or offer meaningful technological differentiation, maintain or improve the strength of our balance sheet and offer additional cost savings or synergies. In closing, let me once again say that I’m very grateful for the support of our shareholders, who have entrusted us to see the company through these trying times and I’m also extremely thankful for our dedicated employees, who have made many sacrifices in adapting to these extraordinary conditions to deliver the superior product and service quality that our customers are accustomed to receiving. With that, we will now take your questions. Operator?