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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) February 22, 2017

 

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 February 22, 2017, we issued a press release announcing our results of operations for the three- and twelve-month period ended December 31, 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, adjusted operating income (loss) and net debt for all periods presented in the release. 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 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.  Net debt is calculated as total debt minus the sum of cash and cash equivalents and short-term investments. 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 and net debt to total debt which are the most closely comparable GAAP financial measures.

 

We included our adjusted EBITDA and adjusted operating income (loss) in the release because management evaluates the performance of our operating segments and our consolidated results based on several criteria, including these non-GAAP measures, because it believes that these financial measures accurately reflect our ongoing profitability and performance. In addition, we included net debt in the release because management uses net debt as a measure of our liquidity.  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 February 23, 2017, 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: February 22, 2017

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 FY 2016 and Fourth Quarter Results

 

·                  4Q revenue of $539 million was 4% over the third quarter

 

·                  4Q GAAP loss per share of $1.17, including $0.87 in after-tax asset impairments and other charges

 

·                  Q4 adjusted EBITDA was $146 million

 

·                  Lower 48 average rig count was up 29% over third quarter

 

·                  Executed a drilling joint venture agreement with Saudi Aramco

 

·                  Issued $600 million in 6-year 5.5% senior notes

 

HAMILTON, Bermuda, February 22, 2017 /PRNewswire/ — Nabors Industries Ltd. (“Nabors”) (NYSE: NBR) today reported full-year 2016 operating revenue of $2.2 billion, compared to operating revenue of $3.9 billion in the prior year, which included $366 million in revenue from the Completion and Production Services segment (NCPS), a business line that merged with C&J Energy Services, Inc. (CJES) on March 24, 2015 and ceased to be consolidated with Nabors on that date.  Net income from continuing operations for the year was a loss of $1.0 billion, or $3.58 per share, compared to a loss of $330 million, or $1.14 per share, in FY 2015.  Included in the net loss from continuing operations for full year 2016 were total after-tax impairments and other charges of $487 million, or $1.71 per share, as well as $0.80 per share in Nabors’ proportional share of CJES’ net loss for the period.  This compares to prior year impairments and other charges of $380 million, or $1.31 per share, and $0.29 per diluted share for the company’s proportional share of CJES’ net loss.

 

Revenue for the quarter of $539 million represented an increase of $19.2 million, the first sequential increase in nine quarters.  Net loss from continuing operations for the fourth quarter totaled $331 million, or $1.17 per share.  The fourth quarter results include $245 million in net after-tax charges, or $0.87 per share, related primarily to the impairment and retirement of certain assets.  These results compare to a loss of $99.0 million, or $0.35 per share, in the preceding quarter.

 

Anthony Petrello, Nabors’ Chairman and CEO, commented, “2016 was a challenging year with the U.S. rig count reaching its lowest point since rig counts were first published.  Nabors was proportionally impacted with our working U.S. land rig count declining as much as 81% from our late 2014 high.  Our U.S. rig count bottomed in the second quarter while our international count appears to have done so at the end of 2016.  We believe the fourth quarter should mark the

 



 

low point in our financial results both in North America and internationally.  Despite the challenges of 2016, we delivered positive free cash flow while funding the continued upgrading of our U.S. fleet.  We also were able to implement our new operating system, maintain our critical engineering projects, such as the development of automation initiatives, and keep our dividend commitment.  We achieved this through stringent costs control, disciplined capital allocation and efficiencies derived from the streamlining of our operations, engineering and support organizations.  We also deployed a significant number of new and upgraded rigs and rolled out our SmartRig™ systems and introduced our iRig® technology.  These new technologies represent a game changer in the implementation of a high degree of automation of both surface and downhole drilling systems.

 

“The high point of the year was the fourth quarter signing of a joint venture agreement with Saudi Aramco, a key strategic relationship and growth driver for both parties.  We expect to form the JV at the end of the second quarter.  The formation of this new company will be a significant step in creating a best-in-class local drilling operation, utilizing locally manufactured rigs, in accordance with the Kingdom’s Vision 2030 initiative.”

 

Consolidated and Segment Results

 

Adjusted operating income for the Company was a loss of $70.2 million during the quarter as compared to a loss of $72.0 million in the prior quarter.  Drilling & Rig Services adjusted operating income was a loss of $36.4 million, slightly better than the loss of $38.4 million in the third quarter.  Quarterly adjusted EBITDA for the Company showed a slight decrease sequentially at $146 million, compared to $149 million in the third quarter.  For the quarter, the Company averaged 177 rigs operating at an average gross margin of $12,482 per rig day, compared to 164 rigs at $14,029 per rig day in the third quarter.

 

International adjusted EBITDA decreased sequentially by $20.5 million to $128 million.  The decrease was attributable to several factors, the most impactful being a reduction of 5.5 average rigs working.  These reductions are mostly temporary and consist of three rigs in Algeria and single rigs in various other venues for a portion of the quarter.  Aggregating to a slightly larger impact were an unusually high number of non-revenue days for rig maintenance in Saudi combined with a lesser amount of discrete favorable items in the fourth quarter in comparison to the third.  The Company has recently had five high-specification rigs commence with another rig startup imminent.  Most of these rigs commenced either late in, or subsequent to, the fourth quarter.  This leads to an expectation of gradually improving results in the near term and more meaningful increases as the year progresses.  Although some tenders have been delayed, there are still numerous awards pending with second-half start dates, further supporting the improving outlook.  Canada operations increased sequentially with seasonally stronger winter activity.

 

The U.S. Drilling segment posted adjusted EBITDA of $49.2 million for the quarter, primarily as a result of a 26% increase in rig activity and higher revenues in Alaska.  Nearly all of the rig count increase was realized in the lower 48 operation which averaged 64 rigs operating in the quarter compared to 50 in the third quarter.  The Company currently has 86 rigs on revenue in the lower 48 operation, but expects lower average margins in the near term as more rigs return to work at current market rates and incur start-up expenses.  However, with improving pricing and

 



 

relatively short average contract durations, this margin trend can reverse quickly.  This segment expects to complete six X, R and M800 new built rigs by year end and utilize some existing components to construct four M1000 rigs, all but one of which already have customer commitments. All of this supports the expectation of increasingly improving results throughout the balance of 2017.

 

Rig Services, which consists of the Company’s manufacturing, directional drilling, and complementary services, reported positive adjusted EBITDA of $0.9 million compared to a loss of $4.3 million in the third quarter.  The improved results were primarily from increased penetration by Nabors Drilling Solutions (NDS), and a modest improvement in Canrig primarily attributable to reduced costs and higher revenues from service and repair operations.  The Company expects these trends to accelerate throughout 2017.

 

William Restrepo, Nabors’ Chief Financial Officer, stated, “2016 was a productive year in which we continued to execute on our near and longer term goals.  We significantly enhanced the capabilities of our lower 48 fleet while maintaining capital and cost discipline.  We signed a joint venture with our largest customer.  We started to turn our NDS vision into a reality and increased our market lead in rig automation and integration.  Finally, we generated free cash flow throughout the down cycle, and recently extended our debt maturity profile through attractively priced six-year senior notes.

 

“I am excited about our prospects for 2017.  We expect to accelerate NDS growth and deliver on our goal of fully automating our rigs and the drilling process through increased integration.  We plan to complete the upgrading of our U.S. fleet into the most modern and capable in the industry.  We believe 2017 will allow us to grow our U.S. and International rig counts, while making significant progress in pricing.  Nabors is committed to remain disciplined and focused on our strategy to deliver solid cash generation and return on capital to our shareholders.

 

Mr. Petrello concluded, “We expect the fourth quarter to represent the bottom in our results with a gradual progression in the first half followed by a more meaningful improvement throughout the second half, assuming stable oil prices.  Our rig counts and margins are increasing with our highest specification rigs, the PACE®-X and PACE®-M800, operating at full utilization.  NDS has achieved positive adjusted EBITDA and increased market penetration.  We continue to implement our Rigtelligent™ operating system and upgrade our AC rigs to SmartRigTM system configuration at a steady pace.  As of today, we have 61 SmartRig™ system upgrades in service and plan to have completed 100 by year end.  We expect to begin deploying our new iRacker automated drill pipe and casing handling system later this year.  There are clear signs of building momentum in our business, particularly considering the customer commitments for nine of our ten 2017 new deployments in the low $20,000 per day range.  All of this bolsters our confidence in an improving 2017 outlook.  Meanwhile, we will continue to focus on controlling costs, reducing leverage and restoring attractive rates of return on our capital.”

 

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 included in this 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 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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except per share amounts)

 

2016

 

2015

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

538,948

 

$

738,872

 

$

519,729

 

$

2,227,839

 

$

3,864,437

 

Earnings (losses) from unconsolidated affiliates

 

4

 

(45,367

)

2

 

(221,914

)

(75,081

)

Investment income (loss)

 

260

 

180

 

310

 

1,183

 

2,308

 

Total revenues and other income

 

539,212

 

693,685

 

520,041

 

2,007,108

 

3,791,664

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

331,560

 

445,130

 

306,436

 

1,344,298

 

2,371,436

 

General and administrative expenses

 

52,603

 

61,056

 

56,078

 

227,639

 

324,328

 

Research and engineering

 

8,764

 

9,354

 

8,476

 

33,582

 

41,253

 

Depreciation and amortization

 

216,187

 

231,137

 

220,713

 

871,631

 

970,459

 

Interest expense

 

47,557

 

46,410

 

46,836

 

185,360

 

181,928

 

Other, net

 

275,270

 

124,568

 

10,392

 

542,673

 

329,795

 

Total costs and other deductions

 

931,941

 

917,655

 

648,931

 

3,205,183

 

4,219,199

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(392,729

)

(223,970

)

(128,890

)

(1,198,075

)

(427,535

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(62,533

)

(62,880

)

(31,051

)

(186,831

)

(98,038

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(330,196

)

(161,090

)

(97,839

)

(1,011,244

)

(329,497

)

Income (loss) from discontinued operations, net of tax

 

(4,266

)

(1,730

)

(12,187

)

(18,363

)

(42,797

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(334,462

)

(162,820

)

(110,026

)

(1,029,607

)

(372,294

)

Less: Net (income) loss attributable to noncontrolling interest

 

(1,125

)

(834

)

(1,185

)

(135

)

(381

)

Net income (loss) attributable to Nabors

 

$

(335,587

)

$

(163,654

)

$

(111,211

)

$

(1,029,742

)

$

(372,675

)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Nabors:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(331,321

)

$

(161,924

)

$

(99,024

)

$

(1,011,379

)

$

(329,878

)

Net income (loss) from discontinued operations

 

(4,266

)

(1,730

)

(12,187

)

(18,363

)

(42,797

)

Net income (loss) attributable to Nabors

 

$

(335,587

)

$

(163,654

)

$

(111,211

)

$

(1,029,742

)

$

(372,675

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(1.17

)

$

(.57

)

$

(.35

)

$

(3.58

)

$

(1.14

)

Basic from discontinued operations

 

(.01

)

(.01

)

(.04

)

(.06

)

(.15

)

Basic

 

$

(1.18

)

$

(.58

)

$

(.39

)

$

(3.64

)

$

(1.29

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(1.17

)

$

(.57

)

$

(.35

)

$

(3.58

)

$

(1.14

)

Diluted from discontinued operations

 

(.01

)

(.01

)

(.04

)

(.06

)

(.15

)

Diluted

 

$

(1.18

)

$

(.58

)

$

(.39

)

$

(3.64

)

$

(1.29

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number

 

 

 

 

 

 

 

 

 

 

 

of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

276,793

 

276,371

 

276,707

 

276,475

 

282,982

 

Diluted

 

276,793

 

276,371

 

276,707

 

276,475

 

282,982

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

146,021

 

$

223,332

 

$

148,739

 

$

622,320

 

$

1,127,420

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss)

 

$

(70,166

)

$

(7,805

)

$

(71,974

)

$

(249,311

)

$

156,961

 

 

1-1



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands)

 

2016

 

2016

 

2015

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

295,202

 

$

200,650

 

$

274,589

 

Accounts receivable, net

 

508,355

 

503,966

 

784,671

 

Assets held for sale

 

76,668

 

69,436

 

75,678

 

Other current assets

 

275,614

 

298,028

 

340,959

 

Total current assets

 

1,155,839

 

1,072,080

 

1,475,897

 

Property, plant and equipment, net

 

6,267,583

 

6,616,711

 

7,027,802

 

Goodwill

 

166,917

 

167,131

 

166,659

 

Investment in unconsolidated affiliates

 

893

 

889

 

415,177

 

Other long-term assets

 

595,783

 

567,693

 

452,305

 

Total assets

 

$

8,187,015

 

$

8,424,504

 

$

9,537,840

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current debt

 

$

297

 

$

120

 

$

6,508

 

Other current liabilities

 

821,637

 

787,742

 

999,991

 

Total current liabilities

 

821,934

 

787,862

 

1,006,499

 

Long-term debt

 

3,578,335

 

3,475,978

 

3,655,200

 

Other long-term liabilities

 

531,951

 

561,970

 

582,273

 

Total liabilities

 

4,932,220

 

4,825,810

 

5,243,972

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

3,247,025

 

3,591,929

 

4,282,710

 

Noncontrolling interest

 

7,770

 

6,765

 

11,158

 

Total equity

 

3,254,795

 

3,598,694

 

4,293,868

 

Total liabilities and equity

 

$

8,187,015

 

$

8,424,504

 

$

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

 

Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except rig activity)

 

2016

 

2015

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

148,959

 

$

222,060

 

$

116,095

 

$

554,072

 

$

1,256,989

 

Canada

 

16,917

 

28,312

 

10,444

 

51,472

 

137,494

 

International

 

343,259

 

448,507

 

363,552

 

1,508,890

 

1,862,393

 

Rig Services (1)

 

63,659

 

72,862

 

58,950

 

215,710

 

391,066

 

Subtotal Drilling & Rig Services

 

572,794

 

771,741

 

549,041

 

2,330,144

 

3,647,942

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion & Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

 

 

 

207,860

 

Production Services

 

 

 

 

 

158,512

 

Subtotal Completion & Production Services

 

 

 

 

 

366,372

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (2)

 

(33,846

)

(32,869

)

(29,312

)

(102,305

)

(149,877

)

Total operating revenues

 

$

538,948

 

$

738,872

 

$

519,729

 

$

2,227,839

 

$

3,864,437

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

49,245

 

$

94,254

 

$

37,299

 

$

190,657

 

$

513,003

 

Canada

 

2,647

 

10,041

 

196

 

5,325

 

39,757

 

International

 

128,289

 

160,716

 

148,833

 

576,049

 

719,266

 

Rig Services (1)

 

914

 

(4,491

)

(4,334

)

(15,334

)

20,978

 

Subtotal Drilling & Rig Services

 

181,095

 

260,520

 

181,994

 

756,697

 

1,293,004

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion & Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

 

 

 

(28,110

)

Production Services

 

 

 

 

 

23,043

 

Subtotal Completion & Production Services

 

 

 

 

 

(5,067

)

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (4)

 

(35,074

)

(37,188

)

(33,255

)

(134,377

)

(160,517

)

Total adjusted EBITDA

 

$

146,021

 

$

223,332

 

$

148,739

 

$

622,320

 

$

1,127,420

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

(42,947

)

$

(7,398

)

$

(58,876

)

$

(197,710

)

$

87,051

 

Canada

 

(8,553

)

(1,034

)

(10,156

)

(36,818

)

(7,029

)

International

 

20,351

 

51,850

 

43,595

 

164,677

 

308,262

 

Rig Services (1)

 

(5,246

)

(13,505

)

(12,937

)

(48,484

)

(12,641

)

Subtotal Drilling & Rig Services

 

(36,395

)

29,913

 

(38,374

)

(118,335

)

375,643

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion & Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

 

 

 

(55,243

)

Production Services

 

 

 

 

 

(3,559

)

Subtotal Completion & Production Services

 

 

 

 

 

(58,802

)

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (4)

 

(33,771

)

(37,718

)

(33,600

)

(130,976

)

(159,880

)

Total adjusted operating income (loss)

 

$

(70,166

)

$

(7,805

)

$

(71,974

)

$

(249,311

)

$

156,961

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates (6)

 

$

4

 

$

(45,367

)

$

2

 

$

(221,914

)

$

(75,081

)

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Average Rigs Working: (7)

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

72.1

 

91.0

 

57.3

 

62.0

 

120.0

 

Canada

 

13.3

 

14.4

 

8.8

 

9.7

 

16.7

 

International

 

91.9

 

117.5

 

97.4

 

100.2

 

124.0

 

Total average rigs working

 

177.3

 

222.9

 

163.5

 

171.9

 

260.7

 

 

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(1)                                 Includes our other services comprised of our manufacturing, directional drilling and complementary 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 $45.4 million for the three months ended December 31, 2015 and $221.9 million and $81.3 million for the years ended December 31, 2016 and 2015, respectively, 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)                                 Represents 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 average rigs working. 

 

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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

 

Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands)

 

2016

 

2015

 

2016

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

146,021

 

$

223,332

 

$

148,739

 

$

622,320

 

$

1,127,420

 

Depreciation and amortization

 

(216,187

)

(231,137

)

(220,713

)

(871,631

)

(970,459

)

Adjusted operating income (loss)

 

(70,166

)

(7,805

)

(71,974

)

(249,311

)

156,961

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

4

 

(45,367

)

2

 

(221,914

)

(75,081

)

Investment income (loss)

 

260

 

180

 

310

 

1,183

 

2,308

 

Interest expense

 

(47,557

)

(46,410

)

(46,836

)

(185,360

)

(181,928

)

Other, net

 

(275,270

)

(124,568

)

(10,392

)

(542,673

)

(329,795

)

Income (loss) from continuing operations before income taxes

 

$

(392,729

)

$

(223,970

)

$

(128,890

)

$

(1,198,075

)

$

(427,535

)

 

1-5



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands)

 

2016

 

2016

 

2015

 

 

 

(Unaudited)

 

 

 

Current debt

 

$

297

 

$

120

 

$

6,508

 

Long-term debt

 

3,578,335

 

3,475,978

 

3,655,200

 

Total Debt

 

3,578,632

 

3,476,098

 

3,661,708

 

Less: Cash and short-term investments

 

295,202

 

200,650

 

274,589

 

Net Debt

 

$

3,283,430

 

$

3,275,448

 

$

3,387,119

 

 

1-6


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Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

 

4Q16 Earnings Presentation February 23, 2017 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 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; our ability to complete and realize the expected benefits of strategic transactions, including our recently announced joint venture in Saudi Arabia; 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, sustained lower oil or natural gas prices that have a material impact on exploration, development or 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. For a discussion of these factors and other risks and uncertainties, please refer to our filings with the Securities and Exchange Commission ("SEC"), including those contained in our Annual Reports of Form 10-K and Quarterly Reports on Form 10-Q, which are available at the SEC's website at www.sec.gov. Forward-Looking Statements

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3 Non-GAAP Financial Measures This presentation refers to certain “non-GAAP” financial measures, such as adjusted EBITDA, adjusted operating income (loss) and net debt. 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”). 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, is provided in the Appendix at the end of this presentation.

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4 Recent Company Highlights Signing of Saudi Arabia Joint Venture agreement with Saudi Aramco took place on October 31, 2016 Deployment of 20 rigs in 4Q16 in the Lower 48 (including two new M800’s), finishing the quarter at 75 rigs on revenue Non-binding MOU signed with Weatherford on February 1, 2017 to form an alliance focused on delivering enhanced drilling solutions to the oil and gas land market in the lower 48 states of the United States. Offering of $600m 5.5% senior unsecured debt due 2023 closed December 2016 Offering of $575m 0.75% senior unsecured convertible notes due 2024 closed January 2017

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5 Financial Overview

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6 Financial Summary Diluted Earnings (Losses) Per Share from continuing operations 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 Includes impairments of $0.87 per share related to the impairment of certain assets and other charges ($000 except EPS) 4Q15 1Q16 2Q16 3Q16 4Q16 Operating Revenues $738,872 $597,571 $571,591 $519,729 $538,948 Adjusted EBITDA 223,332 162,052 165,508 148,739 146,021 Adjusted Income (7,805) (53,766) (53,405) (71,974) (70,166) GAAP Diluted EPS(1) (0.57)(2) (1.41)(3) (0.65)(4) (0.35) (1.17)(5)

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7 Debt and Liquidity As of December 31, 2016 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 *The figures presented on this slide do not include the $575m 0.75% Senior Unsecured Convertible Notes due 2024, which closed in January 2017. Liquidity (at December 31, 2016) Cash & Available Capacity: $2,545 High 4Q15 3Q16 4Q16 Change Change ($MM's) 3/31/2012 12/31/2015 9/30/2016 12/31/2016 4Q16 from 3Q16 4Q16 from 4Q15 Total Debt $4,750 $3,662 $3,476 $3,579 $103 ($83) Cash and ST Investments 494 275 201 295 95 21 Net Debt $4,256 $3,387 $3,275 $3,283 $8 ($104) Shareholder’s Equity 5,811 4,283 3,592 3,247 (345) (1,036) Net Debt to Capitalization(1) 42% 44% 48% 50% 3% 6% Coverage(2) 7.8x 6.2x 3.8x 3.4x (0.4x) (2.8x) Leverage(3) 2.5x 3.2x 5.0x 5.8x 0.8x 2.6x

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8 Drilling and Rig Services

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9 “THE” Nabors Pad Optimal Rig 1500HP 3rd Mud Pump 4th Engine X-Y Walking System 25,000ft Racking Capacity Side-SaddleTM Configuration 1 2 3 4 5 1 2 3 4 5 6 6

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10 Introducing the SMARTRigTM Pad Optimal Capabilities RigtelligentTM - Integrated Operating System Smart applications: Rigwatch® ROCKit® REVit® Drillsmart® Recipe to DrillTM Superior Racking Capacity - 25,000ft NDS-ReadyTM 1 2 3 4 5 5 1 2 3 4 5

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11 Rigs PAD-OPTIMAL RIGS PACE®-X800, PACE®-M800, PACE®-M1000, PACE®-X700 OTHER NBR RIGS PACE®-M550, International Rigs Software/ Services RIGTELLIGENTTM INTEGRATED OPERATING SYSTEM RIGWATCH®, ROCKit®, REVit®, Drillsmart®, RECIPE TO DRILLTM, NDS-Ready™ The SMARTRigTM Tech The iRackerTM System, Full Automation and Closed Loop System The iRig® The iRig® Ultimate Land Drilling Technology & Capabilities

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Rig Fleet(1) 4Q16 Average Rigs Working Average Utilization U.S. Lower 48 AC > 1500HP 106 56 53% AC Others 74 6 8% SCR Rigs 23 3 12% U.S. Lower 48 Total 203 64 32% U.S. Offshore 17 4 22% Alaska 16 4 25% Canada 47 13 28% International 160 92 57% Subtotal 443 177 40% Pace®-X Construction 3 Pace®-M800 Construction(2) 2 Pace®-M1000 Construction 4 Total Fleet 452 12 4Q16 Rig Utilization & Availability As of 12/31/16 These two rigs were already completed in Q1/17, but were still under construction in 4Q/16 Note: Subtotals may not foot due to rounding

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Walking Skidding Pad Not Pad Total Lower 48 Capable Capable Rigs Active Total Util. Active Total Util. Active Total Total Active Total Util. Active Total Util. AC 61 129 47% 5 22 23% 66 151 44% 6 29 21% 72* 180 40% PACE X 42 44 95% 0 0 0% 42 44 95% 0 0 0% 42 44 95% PACE M800 4 4 100% 0 0 0% 4 4 100% 0 0 0% 4 4 100% PACE B 7 28 25% 0 0 0% 7 28 25% 1 1 100% 8 29 28% PACE S 5 6 83% 2 4 50% 7 10 70% 1 1 100% 8 11 73% PACE F 0 4 0% 1 6 17% 1 10 10% 2 8 25% 3 18 17% PACE M550 2 31 6% 2 8 25% 4 39 10% 2 18 11% 6 57 11% Other AC Rigs 1 12 8% 0 4 0% 1 16 6% 0 1 0% 1 17 6% SCR 0 3 0% 3 5 60% 3 8 38% 0 15 0% 3 23 13% Total 61 132 46% 8 27 30% 69 159 43% 6 44 14% 75* 203 37% 13 Lower 48 Rig Utilization by Type As of December 31, 2016 * Including three (3) rigs stacked on rate

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14 Nabors Working Rigs As of December 31, 2016 Total = 191(1) (1) Active Revenue Rigs on 12/31/2016 US 81 Colombia 7 Kazakhstan 3 Russia 1 Saudi Arabia 41 Venezuela 5 Ecuador 3 PNG 1 Argentina 19 Oman 4 Kuwait 2 Italy 1 Canada 18 Algeria 3 India 2

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15 Saudi Arabia Joint Venture Expecting Robust Growth in Rigs and Well Count(1) (1) Saudi Aramco In-Kingdom Total Value Add presentation Future Drilling Well Count(1) “Our ability to increase supplies of natural gas to reduce the Kingdom’s reliance on liquid fuel for electricity generation and to power seawater desalination plants is vital for the country’s continued prosperity”. “To meet this challenge, we plan to nearly double our supply of gas over the coming decade to more than 20 billion standard cubic feet per day, taking clean gas to more than 70% of our utilities fuel mix” - Saudi Aramco Website Manifa Field - Saudi Arabia ~100% Increase *

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16 Appendix

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17 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. 1Q16 2Q16 3Q16 4Q16 Drilling Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working U.S. Drilling $10,043 64.9 $12,274 53.7 $8,480 57.3 $8,464 72.1 Canada 3,585 12.5 5,484 4.2 1,912 8.8 3,352 13.3 International 16,489 110.5 18,172 101.2 18,387 97.4 16,953 91.9

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18 Reconciliation of Adjusted EBITDA to Income (Loss) from Cont. Operations Before Income Taxes 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. 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. However, management evaluates the performance of our operating segments and the consolidated Company based on several criteria, including adjusted EBITDA, adjusted operating income (loss), 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 which are their nearest comparable GAAP financial measures, is provided in the table below. Three Months Ended Year Ended December 31, September 30, December 31, (In Thousands) 2016 2015 2016 2016 2015 Adjusted EBITDA $146,021 $223,332 $148,739 $622,320 $1,127,420 Depreciation and Amortization (216,187) (231,137) (220,713) (871,631) (970,459) Adjusted Operating Income (loss) (70,166) (7,805) (71,974) (249,311) 156,961 Earnings (losses) from unconsolidated affiliates 4 (45,367) 2 (221,914) (75,081) Investment Income (loss) 260 180 310 1,183 2,308 Interest Expense (47,557) (46,410) (46,836) (185,360) (181,928) Other, net (275,270) (124,568) (10,392) (542,673) (329,795) Income (loss) from continuing operations before income taxes ($392,729) ($223,970) ($128,890) ($1,198,075) ($427,535)

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19 Reconciliation of Net Debt to Total Debt Net debt is computed by subtracting the sum of cash and short-term investments from total debt. This non-GAAP measure has limitations and therefore 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 consolidated Company based on several criteria, including net debt, because it believes that this financial measure accurately measures our liquidity. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze the company’s performance. Other companies in our industry may compute this measure differently. A reconciliation of net debt to total debt, which is its nearest comparable GAAP financial measure, is provided in the table below. (In Thousands) 2012 2013 2014 2015 2016 Long-Term Debt $4,355,181 $3,882,055 $4,331,840 $3,655,200 $3,578,335 Current Debt 364 10,185 6,190 6,508 297 Total Debt $4,355,545 $3,892,240 $4,338,030 $3,661,708 $3,578,632 Cash & Cash Equivalents $524,922 $389,915 $501,149 $254,530 $264,093 ST Investments 253,282 117,218 35,020 20,059 31,109 Net Debt $3,577,341 $3,385,107 $3,801,861 $3,387,119 $3,283,430

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