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Section 1: 8-K (8-K)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) October 25, 2016

 

NABORS INDUSTRIES LTD.

(Exact name of registrant as specified in its charter)

 

Bermuda

 

001-32657

 

98-0363970

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Commission File Number)

 

(I.R.S. Employer
Identification No.)

 

Crown House
4 Par-la-Ville Road
Second Floor
Hamilton, HM08 Bermuda

 

N/A

(Address of principal executive offices)

 

(Zip Code)

 

(441) 292-1510

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02                                           Results of Operations and Financial Condition.

 

On October 25, 2016, we issued a press release announcing our results of operations for the three and nine months ended September 30, 2016.  A copy of that release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

 

The press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.  Such forward-looking statements are subject to risks and uncertainties, as disclosed from time to time in our filings with the Securities and Exchange Commission.  As a result of these factors, our actual results may differ materially from those indicated or implied by such forward-looking statements.

 

We also presented in the press release certain “non-GAAP” financial measures.  We presented our adjusted EBITDA and adjusted operating income (loss) for all periods presented in the release. The components of these non-GAAP financial measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from the sum of operating revenues.  Adjusted operating income (loss) is computed similarly, but also subtracts depreciation and amortization expenses from the sum of operating revenues. As part of the press release information, we have provided a reconciliation of adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP financial measure.

 

We included our adjusted EBITDA and adjusted operating income (loss) in the release because management evaluates the performance of our operating segments and the Company’s consolidated results based on several criteria, including these non-GAAP measures, because it believes these financial measures reflect our ongoing profitability and performance.  There are, however, certain limitations to these measures and therefore they should be considered in addition to and not as an alternative to our results in accordance with GAAP.

 

Item 8.01.                                        Other Events.

 

On October 26, 2016, we will present certain information in connection with our call with shareholders, analysts and others relating to our results of operations discussed above.  Attached hereto as Exhibit 99.2 are slides that will be presented at that time.

 

Item 9.01                                           Financial Statements and Exhibits.

 

(d)  Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

NABORS INDUSTRIES LTD.

 

 

Date: October 25, 2016

By:

/s/ Mark D. Andrews

 

Mark D. Andrews

 

Corporate Secretary

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

4


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

NEWS RELEASE

 

Nabors Announces Third-Quarter Results

 

HAMILTON, Bermuda, October 25, 2016 /PRNewswire/ — Nabors Industries Ltd. (“Nabors”) (NYSE: NBR) today reported third-quarter 2016 operating revenues of $519.7 million, compared to operating revenues of $571.6 million in the second quarter of 2016.  Net income from continuing operations, attributable to Nabors, for the current quarter was a loss of $99.0 million, or $0.35 per diluted share, compared to a loss of $183.7 million, or $0.65 per diluted share, last quarter.

 

Anthony Petrello, Nabors’ Chairman, President, and CEO, commented, “After a challenging downturn, we are experiencing significant utilization increases in our Lower 48 market, although spot market pricing continues to remain competitive.  Similarly, our international markets are showing signs of impending activity increases.  We are very encouraged by our customers’ acceptance of our newest rig, the PACE®-M800.  We now have contracts for the first four PACE®-M800s, with two already deployed, and awards for two more.   Likewise, the high demand for our PACE®-X rigs has brought the utilization of that fleet to over 80%.  This increased demand is beginning to exert upward pressure on pricing for these top-end rigs, although, in the near-term, our fleet average margins will remain under pressure due to expiring long-term contracts.  We are also implementing a cost-effective plan to enhance other classes of our existing AC rig fleet to incorporate most of the features of these rigs.  Regardless of how the recovery unfolds, we expect our reduced cost structure, improved performance and our various technology initiatives to significantly increase operating leverage across our global fleet.

 

“We recorded a sequential decline in adjusted operating income, as a modest increase in Rig Services was more than offset by reduction in one-time gains in Drilling, as compared to the second quarter.  We expect this trend in operating income to continue into the beginning of 2017 driven by lower U.S. Drilling margins and International utilization.”

 

Segment Results

 

Adjusted operating income for the Company was a loss of $72.0 million during the quarter. Drilling and Rig Services adjusted operating income was a loss of $38.4 million compared to a loss of $25.0 million in the second quarter.  Quarterly adjusted EBITDA for the Company decreased sequentially to $148.7 million, a 10% decline from the previous quarter due to a reduction in certain revenue items that were discrete to each quarter.  For the quarter, the Company averaged 163.5 rig years operating at an average gross margin of $14,029 per rig day, compared to 159.1 rigs at $15,850 per rig day in the second quarter and 187.9 rig years at an average gross margin of $13,407 per rig day in the first quarter.

 



 

International adjusted EBITDA decreased by 1% sequentially to $148.8 million.  A reduction of four  rig years in this segment was mostly offset by an increase in margin.  Compared to the third quarter, the Company expects quarterly adjusted EBITDA to remain under pressure in the near term.  The Company is encouraged by planned startups at the beginning of the year, as well as, increased tendering activity with mid-2017 start dates.  Canada operations should reflect the seasonally stronger winter activity, although the rebound should be less robust than usual.

 

The U.S. Drilling segment posted adjusted EBITDA of $37.3 million for the quarter, reflecting further margin erosion offset by a 7% increase in rig years.  The Lower 48 operation saw a 13% increase in rigs working compared to the second quarter, with an average rig count of 50.  The Company is currently working 61 rigs in the Lower 48 operation.  The recent start-up of rig CDR-3 and seasonal winter activity will benefit near-term Alaskan results.

 

Rig Services, which consists of the Company’s manufacturing, directional drilling, and complementary services, reported a loss in adjusted EBITDA of $4.3 million, representing a $6.1 million improvement over the second quarter.  This increase is primarily attributable to reduced costs and higher revenues from service and repair operations.  The Company expects this trend to continue.

 

William Restrepo, Nabors’ Chief Financial Officer, stated, “Third-quarter performance by our company has confirmed the trends we had foreseen after the second quarter. First, our International business has remained healthy and continues to provide strong cash generation. Second, our rig count in the Lower 48 market has rebounded. Our working rigs have increased by 66% since our trough in early April, and we have gained market share, mainly on strong demand for our PACE®-X rigs. Third, as anticipated, the daily margins for our Lower 48 rigs eroded some more, as some term contracts expired, and we added more rigs at the currently lower spot rates. We expect this deterioration to continue near-term. Finally, our focus on costs at all levels of the organization has paid off, as we have mitigated the impact of average dayrate declines in the U.S., contained our SG&A expense in the face of an uptick in rig count and controlled our capital expenditures.”

 

Mr. Petrello concluded, “Recent increases in Lower 48 activity and stabilizing oil prices are encouraging.   We are experiencing utilization increases across many of our AC rig classes, particularly our pad-optimal PACE®-X and M800 rigs, which are rapidly approaching full utilization.  All of our new-build rigs are deployed with our new Rigtelligent™ modular-code operating system and we have commenced retrofitting most of our AC fleet.  This operating system effectively automates routine tasks and integrates downhole processes with the rig.  The incorporation of this operating system, together with ongoing enhancements to our other AC rig classes, will give us 100 pad-optimal, high-specification, automated rigs by mid-2017.  We believe these actions position us well to address the changing market dynamic both in the United States and internationally.”

 

About Nabors

 

Nabors Industries (NYSE: NBR) owns and operates the world’s largest land-based drilling rig fleet and is a leading provider of offshore platform rigs in the United States and numerous international markets. Nabors also provides directional drilling services, performance tools, and innovative technologies throughout many of the most significant oil and gas markets. Leveraging our advanced drilling automation

 



 

capabilities, Nabors’ highly skilled workforce continues to set new standards for operational excellence and transform our industry.

 

Forward-looking Statements

 

The information above includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to a number of risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, Nabors’ actual results may differ materially from those indicated or implied by such forward-looking statements.  The forward-looking statements contained in this press release reflect management’s estimates and beliefs as of the date of this press release.  Nabors does not undertake to update these forward-looking statements.

 

Non-GAAP Disclaimer

 

This press release presents certain “non-GAAP” financial measures.  The components of these non-GAAP measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues.  Adjusted operating income (loss) is computed similarly, but also subtracts depreciation and amortization expenses from operating revenues. Net debt is computed by subtracting the sum of cash and short-term investments from total debt.  Each of these non-GAAP measures has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted EBITDA and adjusted operating income exclude certain cash expenses that we are obligated to make.  However, management evaluates the performance of our operating segments and the consolidated Company based on several criteria, including adjusted EBITDA, adjusted operating income (loss), and net debt, because it believes that these financial measures accurately reflect our ongoing profitability and performance. In addition, securities analysts and investors use these measures as some of the metrics on which they analyze the company’s performance. Other companies in our industry may compute these measures differently.  A reconciliation of adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes and net debt to total debt, which are their nearest comparable GAAP financial measures, are included in the tables at the end of this press release.

 

Media Contact:  Dennis A. Smith, Vice President of Corporate Development & Investor Relations, +1 281-775-8038.  To request investor materials, contact Nabors’ corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail at mark.andrews@nabors.com

 


 


 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands, except per share amounts)

 

2016

 

2015

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

519,729

 

$

847,553

 

$

571,591

 

$

1,688,891

 

$

3,125,565

 

Earnings (losses) from unconsolidated affiliates

 

2

 

(35,100

)

(54,769

)

(221,918

)

(29,714

)

Investment income (loss)

 

310

 

(22

)

270

 

923

 

2,128

 

Total revenues and other income

 

520,041

 

812,431

 

517,092

 

1,467,896

 

3,097,979

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

306,436

 

518,174

 

341,279

 

1,012,738

 

1,926,306

 

General and administrative expenses

 

56,078

 

72,032

 

56,624

 

175,036

 

263,272

 

Research and engineering

 

8,476

 

9,716

 

8,180

 

24,818

 

31,899

 

Depreciation and amortization

 

220,713

 

240,107

 

218,913

 

655,444

 

739,322

 

Interest expense

 

46,836

 

44,448

 

45,237

 

137,803

 

135,518

 

Other, net

 

10,392

 

259,731

 

74,607

 

267,403

 

205,227

 

Total costs and other deductions

 

648,931

 

1,144,208

 

744,840

 

2,273,242

 

3,301,544

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(128,890

)

(331,777

)

(227,748

)

(805,346

)

(203,565

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(31,051

)

(80,898

)

(41,183

)

(124,298

)

(35,158

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(97,839

)

(250,879

)

(186,565

)

(681,048

)

(168,407

)

Income (loss) from discontinued operations, net of tax

 

(12,187

)

(45,275

)

(984

)

(14,097

)

(41,067

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(110,026

)

(296,154

)

(187,549

)

(695,145

)

(209,474

)

Less: Net (income) loss attributable to noncontrolling interest

 

(1,185

)

320

 

2,899

 

990

 

453

 

Net income (loss) attributable to Nabors

 

$

(111,211

)

$

(295,834

)

$

(184,650

)

$

(694,155

)

$

(209,021

)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Nabors:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(99,024

)

$

(250,559

)

$

(183,666

)

$

(680,058

)

$

(167,954

)

Net income (loss) from discontinued operations

 

(12,187

)

(45,275

)

(984

)

(14,097

)

(41,067

)

Net income (loss) attributable to Nabors

 

$

(111,211

)

$

(295,834

)

$

(184,650

)

$

(694,155

)

$

(209,021

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(.35

)

$

(.86

)

$

(.65

)

$

(2.41

)

$

(.57

)

Basic from discontinued operations

 

(.04

)

(.16

)

 

(.05

)

(.15

)

Basic

 

$

(.39

)

$

(1.02

)

$

(.65

)

$

(2.46

)

$

(.72

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(.35

)

$

(.86

)

$

(.65

)

$

(2.41

)

$

(.57

)

Diluted from discontinued operations

 

(.04

)

(.16

)

 

(.05

)

(.15

)

Diluted

 

$

(.39

)

$

(1.02

)

$

(.65

)

$

(2.46

)

$

(.72

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

276,707

 

284,112

 

276,550

 

276,369

 

285,186

 

Diluted

 

276,707

 

284,112

 

276,550

 

276,369

 

285,186

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (1)

 

$

148,739

 

$

247,631

 

$

165,508

 

$

476,299

 

$

904,088

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss) (2)

 

$

(71,974

)

$

7,524

 

$

(53,405

)

$

(179,145

)

$

164,766

 

 


(1)

Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the Company’s consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance. Other companies in our industry may compute these measures differently. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading “Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes”.

 

 

(2)

Adjusted operating income (loss) is computed by subtracting the sum of direct costs, general and administrative expenses, research and engineering expenses and depreciation and amortization from operating revenues. Adjusted operating income (loss) is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the Company’s consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance. Other companies in our industry may compute these measures differently. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading “Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes”.

 

1-1



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

June 30,

 

December 31,

 

(In thousands)

 

2016

 

2016

 

2015

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

200,650

 

$

255,856

 

$

274,589

 

Accounts receivable, net

 

503,966

 

504,099

 

784,671

 

Assets held for sale

 

69,436

 

86,608

 

75,678

 

Other current assets

 

336,668

 

344,680

 

340,959

 

Total current assets

 

1,110,720

 

1,191,243

 

1,475,897

 

Property, plant and equipment, net

 

6,616,711

 

6,765,257

 

7,027,802

 

Goodwill

 

167,131

 

167,275

 

166,659

 

Investment in unconsolidated affiliates

 

889

 

888

 

415,177

 

Other long-term assets

 

529,053

 

531,642

 

452,305

 

Total assets

 

$

8,424,504

 

$

8,656,305

 

$

9,537,840

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current debt

 

$

120

 

$

175

 

$

6,508

 

Other current liabilities

 

787,742

 

868,000

 

999,991

 

Total current liabilities

 

787,862

 

868,175

 

1,006,499

 

Long-term debt

 

3,475,978

 

3,503,172

 

3,655,200

 

Other long-term liabilities

 

561,970

 

562,260

 

582,273

 

Total liabilities

 

4,825,810

 

4,933,607

 

5,243,972

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

3,591,929

 

3,715,850

 

4,282,710

 

Noncontrolling interest

 

6,765

 

6,848

 

11,158

 

Total equity

 

3,598,694

 

3,722,698

 

4,293,868

 

Total liabilities and equity

 

$

8,424,504

 

$

8,656,305

 

$

9,537,840

 

 

1-2



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SEGMENT REPORTING

(Unaudited)

 

The following tables set forth certain information with respect to our reportable segments and rig activity:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands, except rig activity)

 

2016

 

2015

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

116,095

 

$

259,939

 

$

140,342

 

$

405,113

 

$

1,034,929

 

Canada

 

10,444

 

29,929

 

6,617

 

34,555

 

109,182

 

International

 

363,552

 

516,180

 

401,024

 

1,165,631

 

1,413,886

 

Rig Services (1)

 

58,950

 

73,521

 

39,248

 

152,051

 

318,204

 

Subtotal Drilling & Rig Services

 

549,041

 

879,569

 

587,231

 

1,757,350

 

2,876,201

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion & Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

 

 

 

207,860

 

Production Services

 

 

 

 

 

158,512

 

Subtotal Completion & Production Services

 

 

 

 

 

366,372

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (2)

 

(29,312

)

(32,016

)

(15,640

)

(68,459

)

(117,008

)

Total operating revenues

 

$

519,729

 

$

847,553

 

$

571,591

 

$

1,688,891

 

$

3,125,565

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

37,299

 

$

94,505

 

$

52,878

 

$

141,412

 

$

418,749

 

Canada

 

196

 

7,516

 

360

 

2,678

 

29,716

 

International

 

148,833

 

186,451

 

150,618

 

447,760

 

558,550

 

Rig Services (1)

 

(4,334

)

(2,455

)

(10,433

)

(16,248

)

25,469

 

Subtotal Drilling & Rig Services

 

181,994

 

286,017

 

193,423

 

575,602

 

1,032,484

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion & Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

 

 

 

(28,110

)

Production Services

 

 

 

 

 

23,043

 

Subtotal Completion & Production Services

 

 

 

 

 

(5,067

)

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (4)

 

(33,255

)

(38,386

)

(27,915

)

(99,303

)

(123,329

)

Total adjusted EBITDA

 

$

148,739

 

$

247,631

 

$

165,508

 

$

476,299

 

$

904,088

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

(58,876

)

$

(14,034

)

$

(48,328

)

$

(154,763

)

$

94,449

 

Canada

 

(10,156

)

(4,085

)

(10,831

)

(28,265

)

(5,995

)

International

 

43,595

 

74,039

 

53,859

 

144,326

 

256,412

 

Rig Services (1)

 

(12,937

)

(10,434

)

(19,657

)

(43,238

)

864

 

Subtotal Drilling & Rig Services

 

(38,374

)

45,486

 

(24,957

)

(81,940

)

345,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion & Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

 

 

 

(55,243

)

Production Services

 

 

 

 

 

(3,559

)

Subtotal Completion & Production Services

 

 

 

 

 

(58,802

)

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (4)

 

(33,600

)

(37,962

)

(28,448

)

(97,205

)

(122,162

)

Total adjusted operating income (loss)

 

$

(71,974

)

$

7,524

 

$

(53,405

)

$

(179,145

)

$

164,766

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates (6)

 

$

2

 

$

(35,100

)

$

(54,769

)

$

(221,918

)

$

(29,714

)

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Rig years: (7)

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

57.3

 

103.0

 

53.7

 

58.6

 

129.8

 

Canada

 

8.8

 

17.2

 

4.2

 

8.5

 

17.5

 

International (8)

 

97.4

 

121.3

 

101.2

 

103.0

 

126.1

 

Total rig years

 

163.5

 

241.5

 

159.1

 

170.1

 

273.4

 

Rig hours: (9)

 

 

 

 

 

 

 

 

 

 

 

U.S. Production Services

 

 

 

 

 

129,652

 

Canada Production Services

 

 

 

 

 

23,947

 

Total rig hours

 

 

 

 

 

153,599

 

 

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(1)                     Includes our other services comprised of our drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software services.

 

(2)                     Represents the elimination of inter-segment transactions.

 

(3)                     Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the Company’s consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our industry may compute these measures differently.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading “Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes”.

 

(4)                     Represents the elimination of inter-segment transactions and unallocated corporate expenses.

 

(5)                     Adjusted operating income (loss) is computed by subtracting the sum of direct costs, general and administrative expenses, research and engineering expenses and depreciation and amortization from operating revenues. Adjusted operating income (loss) is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the Company’s consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our industry may compute these measures differently.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading “Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes”.

 

(6)                     Represents our share of the net income (loss), as adjusted for our basis difference, of our unconsolidated affiliates accounted for by the equity method, including losses of $35.1 million and $54.8 million for the three months ended September 30, 2015 and June 30, 2016, respectively, and $221.9 million and $35.9 million for the nine months ended September 30, 2016 and 2015 related to our share of the net loss of C&J Energy Services, Ltd. (“C&J”), which we reported on a quarter lag through June 30, 2016.  Beginning in the third quarter of 2016, we ceased accounting for our investment in C&J under the equity method of accounting.

 

(7)                     Excludes well-servicing rigs, which are measured in rig hours.  Includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates.  Rig years represent a measure of the number of equivalent rigs operating during a given period.  For example, one rig operating 182.5 days during a 365-day period represents 0.5 rig years.

 

(8)                     International rig years includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates, which totaled 2.5 years during the three months ended March 31, 2015.  As of May 24, 2015, this was no longer an unconsolidated affiliate.

 

(9)                     Rig hours represents the number of hours that our well-servicing rig fleet operated during the period.  This fleet was included in the Completion & Production Services business that was merged with C&J Energy Services, Inc. in March 2015 and we will therefore no longer report this performance metric.

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands)

 

2016

 

2015

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

148,739

 

$

247,631

 

$

165,508

 

$

476,299

 

$

904,088

 

Depreciation and amortization

 

(220,713

)

(240,107

)

(218,913

)

(655,444

)

(739,322

)

Adjusted operating income (loss)

 

(71,974

)

7,524

 

(53,405

)

(179,145

)

164,766

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

2

 

(35,100

)

(54,769

)

(221,918

)

(29,714

)

Investment income (loss)

 

310

 

(22

)

270

 

923

 

2,128

 

Interest expense

 

(46,836

)

(44,448

)

(45,237

)

(137,803

)

(135,518

)

Other, net

 

(10,392

)

(259,731

)

(74,607

)

(267,403

)

(205,227

)

Income (loss) from continuing operations before income taxes

 

$

(128,890

)

$

(331,777

)

$

(227,748

)

$

(805,346

)

$

(203,565

)

 

1-5



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

September 30,

 

June 30,

 

December 31,

 

(In thousands)

 

2016

 

2016

 

2015

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Current debt

 

$

120

 

$

175

 

$

6,508

 

Long-term debt

 

3,475,978

 

3,503,172

 

3,655,200

 

Total Debt

 

3,476,098

 

3,503,347

 

3,661,708

 

Less: Cash and short-term investments

 

200,650

 

255,856

 

274,589

 

Net Debt

 

$

3,275,448

 

$

3,247,491

 

$

3,387,119

 

 

1-6


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Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

3Q16 Earnings Presentation October 26, 2016 Presented by: Anthony G. Petrello Chairman, President, & Chief Executive Officer William J. Restrepo Chief Financial Officer

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2 We often discuss expectations regarding our markets, demand for our products and services, and our future performance in our annual and quarterly reports, press releases, and other written and oral statements. Such statements, including statements in this document incorporated by reference that relate to matters that are not historical facts are “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934. These “forward-looking statements” are based on our analysis of currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events and actual results could turn out to be significantly different from our expectations. Factors to consider when evaluating these forward-looking statements include, but are not limited to: fluctuations and volatility in worldwide prices of and demand for natural gas and oil; fluctuations in levels of natural gas and oil exploration and development activities; fluctuations in the demand for our services; competitive and technological changes and other developments in the oil and gas and oilfield services industries; changes in the market value of investments accounted for using the equity method of accounting; our ability to complete, and realize the expected benefits of strategic transactions; the existence of operating risks inherent in the oil and gas and oilfield services industries; the possibility of changes in tax and other laws and regulations; the possibility of political or economic instability, civil disturbance, war or acts of terrorism in any of the countries in which we do business; and general economic conditions, including the capital and credit markets. Our businesses depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Therefore, a sustained decrease in the price of natural gas or oil, which could have a material impact on exploration and production activities, could also materially affect our financial position, results of operations and cash flows. The above description of risks and uncertainties is by no means all-inclusive, but is designed to highlight what we believe are important factors to consider. Statements made in this presentation include non-GAAP financial measures. The required reconciliation to the nearest comparable GAAP financial measures is included in the Investor Relations section of our website at http://www.nabors.com. Forward-Looking Statements

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3 Financial Overview

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4 Financial Summary Diluted Earnings (Losses) Per Share from continuing operations Includes 7¢ per share in favorable tax adjustments as well as charges and impairments of 79¢ per share related to our equity investment in C&J Energy Services, Ltd., other small asset impairments, and severance costs Includes net after-tax charges of 35¢ per share related to the impairment of certain assets Includes impairments of $1.12 per share related to our holdings in C&J Energy Services, Ltd. Includes impairments of $0.39 per share related to our holdings in C&J Energy Services, Ltd. and other assets ($000 except EPS) 3Q15 4Q15 1Q16 2Q16 3Q16 Operating Revenues $847,553 $738,872 $597,571 $571,591 $519,729 Adjusted EBITDA 247,631 223,332 162,052 165,508 148,739 Adjusted Income 7,524 (7,805) (53,766) (53,405) (71,974) GAAP Diluted EPS(1) (0.86)(2) (0.57)(3) (1.41)(4) (0.65)(5) (0.35)

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5 Current Debt and Liquidity 1. Capitalization defined as Net Debt plus Shareholders’ Equity 2. Coverage defined as TTM Adjusted EBITDA / TTM Interest Expense 3. Leverage defined as Total Debt / TTM Adjusted EBITDA Note: Subtotals may not foot due to rounding Liquidity (at September 30, 2016) Cash & Available Capacity: $2,128 High 2Q16 3Q16 Change Change ($MM's) 3/31/2012 6/30/2016 9/30/2016 2Q16 to 3Q16 3Q16 from High Total Debt $4,750 $3,503 $3,476 ($27) ($1,274) Cash and ST Investments 494 256 201 (55) (293) Net Debt $4,256 $3,247 $3,275 $28 ($981) Shareholder’s Equity 5,811 3,716 3,592 (124) (2,219) Net Debt to Capitalization(1) 42% 47% 48% 1% 6% Coverage(2) 7.8x 4.4x 3.8x (0.6x) (4.0x) Leverage(3) 2.5x 4.4x 5.0x 0.6x 2.5x

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6 Drilling and Rig Services

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7 3Q16 Rig Utilization & Availability As of 9/30/16 Note: Subtotals may not foot due to rounding Rig Fleet(1) 3Q16 Rig Years(2) Average Utilization U.S. Lower 48 AC 177 49 28% Legacy 47 1 2% U.S. Lower 48 Total 224 50 22% U.S. Offshore 17 4 24% Alaska 17 3 18% Canada 54 9 17% International 160 97 61% Subtotal 472 164 35% Lower 48 Construction 4 Alaska Construction 0 International Construction 1 Total Fleet 477

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8 9/30/16 U.S. Rig Utilization Power Type and Capacity * Including two (2) rigs stacked on rate Walking Skidding Pad Not Pad Total Capable Capable Rigs Active Total Util. Active Total Util. Active Total Total Active Total Util. Active Total Util. AC 46* 126 37% 4 22 18% 50* 148 34% 3 29 10% 53* 177 30% Legacy 0 7 0% 2 7 29% 0 14 0% 0 33 0% 2 47 4% Total 46* 133 35% 6 29 21% 52* 162 32% 3 64 5% 55* 224 25%

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US 63 Algeria 7 Russia 3 Kuwait 1 Saudi Arabia 41 Venezuela 5 Ecuador 3 PNG 1 Argentina 19 Colombia 4 Kazakhstan 2 Italy 1 Canada 13 Oman 4 India 2 9 9/30/16 Nabors Working Rigs Total = 169(1) (1) Active Revenue Rigs on 9/30/2016

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10 Appendix

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11 Rig Margins & Activity (1) Margin = gross margin per rig per day for the period. Gross margin is computed by subtracting direct costs from operating revenues for the period. 4Q15 1Q16 2Q16 3Q16 Drilling Margin (1) Rig Yrs Margin (1) Rig Yrs Margin (1) Rig Yrs Margin (1) Rig Yrs U.S. Drilling $12,274 91.0 $10,043 64.9 $12,274 53.7 $8,480 57.3 Canada 9,473 14.4 3,585 12.5 5,484 4.2 1,912 8.8 International 16,321 117.5 16,489 110.5 18,172 101.2 18,387 97.4

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