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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 27, 2018

 

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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Item 2.02                                           Results of Operations and Financial Condition.

 

On February 27, 2018, Nabors Industries Ltd. (“Nabors” or the “Company”) issued a press release announcing its results of operations for the three- and twelve-month period ended December 31, 2017.  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, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such forward-looking statements are subject to risks and uncertainties, as disclosed from time to time in the Company’s filings with the Securities and Exchange Commission.  As a result of these factors, the Company’s actual results may differ materially from those indicated or implied by such forward-looking statements.

 

Nabors also presented in the press release certain “non-GAAP” financial measures.  Nabors presented its 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. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to make. 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, Nabors has 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.

 

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

 

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act.

 

Item 7.01                                           Regulation FD Disclosure.

 

On February 28, 2018, Nabors will present certain information in connection with its call with shareholders, analysts and others relating to the Company’s results of operations discussed above.  Attached hereto as Exhibit 99.2 are slides that will be presented at that time.

 

2



 

The information included in this Current Report on Form 8-K under Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act.

 

Item 9.01                                           Financial Statements and Exhibits.

 

(d)  Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

4



 

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 27, 2018

By:

/s/Mark D. Andrews

 

 

Mark D. Andrews

 

 

Corporate Secretary

 

5


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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

NEWS RELEASE

 

Nabors Announces FY 2017 and Fourth Quarter Results

 

·                  Q4 operating revenue increased sequentially by 7% to $708 million

 

·                  Q4 adjusted EBITDA increased 14% sequentially to $163 million

 

·                  Q4 net debt reduction of $76 million versus 3Q

 

·                  SANAD (Saudi Aramco JV) commenced operations December 1, 2017

 

·                  Tesco acquisition closed December 15, 2017

 

HAMILTON, Bermuda, February 27, 2018 /PRNewswire/ — Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported full-year 2017 operating revenue of $2.6 billion, compared to operating revenue of $2.2 billion in the prior year.  Net income from continuing operations attributable to Nabors for the year was a loss of $503 million, or $1.75 per share, compared to a loss of $1.0 billion, or $3.58 per share, in FY 2016.

 

Operating revenue for the fourth quarter increased by 7% or $46.2 million to $708 million, reflecting growth in all of our segments.  Net income from continuing operations attributable to Nabors for the fourth quarter was a loss of $116 million, or $0.40 per diluted share.  The quarter results were also adversely affected by $16.5 million or $0.06 per diluted share in post-tax costs related to the Tesco acquisition and the startup of the Saudi Aramco joint venture.  These results compare to a loss of $121 million, or $0.42 per share, in the preceding quarter.

 

Anthony Petrello, Nabors’ Chairman, CEO and President, commented, “2017 demonstrated sustained sequential improvement throughout the year in our operating results.  More importantly, we had a number of achievements during 2017 that bolster our plans to restore healthy returns on capital and reduce leverage over the next three years. Among these were the commencement of our SANAD joint venture with Saudi Aramco, the closing of the Tesco acquisition, substantial completion of our U.S. Lower 48 rig upgrade program, the rollout of our new PACE® M-800 & M-1000 rigs and the achievement of our initial financial milestone for our Nabors Drilling Solutions (NDS) operations, as per our 2020 vision.”

 

Consolidated and Segment Results

 

Adjusted operating income for the Company was a loss of $52 million for the quarter, as compared to a loss of $74 million in the prior quarter. The improvement was principally a result of higher average daily rig margins in the U.S. Drilling segment on a stable rig count.  We also experienced

 



 

significantly better performance in Canrig, NDS and Canada, partially offset by lower results in the Company’s international operations.

 

The U.S. Drilling segment posted a 24% increase in adjusted EBITDA, at $54 million.  This reflected a $1,147 increase in daily average margins despite a one rig drop for the quarter to 106.3 average rigs working.  Today this segment has 114 rigs working with increasing margins, leading to an expectation of further improvement over the coming quarters.  Within this segment, U.S. Lower 48 dayrates for higher specification rigs have improved materially since the third quarter.  These increases resulted in average daily margins of approximately $5,000 in the fourth quarter.  The prospective contribution of the M-400 offshore platform rig in the Gulf of Mexico should further benefit this segment’s results incrementally in both the first and second quarters of 2018.

 

International adjusted EBITDA for the quarter was $129 million, as compared to $137 million in the prior quarter. The decrease was attributable to a lower than expected rig count from delays in commencement of certain rig deployments and the return to more normal average margins compared to the third quarter.  Average daily rig margins declined by $1,020 to $17,213 per rig day in the fourth quarter.  The average number of rigs working was 90.7, one fewer than the third quarter average.   Today the international operation has 96 rigs working and expects this to increase as the year progresses.

 

In Canada, adjusted EBITDA improved sequentially to $4.3 million from $2.6 million in the third quarter.  This was attributable to a 33% increase in average daily margins to $4,650, as the seasonal increase in winter rig content materialized. The quarterly average of 14 rigs working matched the third quarter average.  Today the rig count is 23 with the winter drilling season underway, leading to an expectation of sequential margin and activity improvements in the first quarter.

 

Beginning with the current quarter, the Company has modified the reporting for its Rig Services segment to break out Nabors Drilling Solutions and Canrig into separate reporting segments: Drilling Solutions and Rig Technologies.  The Drilling Solutions segment will be comprised of various drilling services including, performance drilling software, well bore placement, managed pressure drilling and tubular running services.  For the quarter, Drilling Solutions posted adjusted EBITDA of $12.6 million compared to $9.8 million in the third quarter and $2.3 million in the fourth quarter of 2016.  The 2018 expectations for this segment is to double this quarterly adjusted EBITDA run rate by the end of 2018.

 

The Rig Technologies segment is now primarily composed of Canrig which manufactures drilling equipment, automated systems and downhole tools.  Also included in this segment are two other product development operations that do not currently generate revenue, the rotary steerable tool and the recently acquired rig floor robotic systems entities.  For the quarter, Rig Technologies adjusted EBITDA was a loss of $4.3 million, compared to a loss of $7.9 million in the third quarter.  The improvement was attributable to a large increase in shipments of rig equipment, some of which had been deferred from the third quarter, following the oil price drop in mid-2017.  Higher shipments were partially offset by the full quarter impact of development expenses in the recently acquired robotics business.  The robotics and rotary steerable operations are still in the product development stages but are expected to see improving results in 2018 as they enter the commercialization phase of their principal products.

 



 

Tesco operations have been integrated successfully with progress on synergies proceeding as previously communicated. The Company will report Tesco results within two of its segments. The tubular services operations along with the related accessory sales, as well as drilling performance software, will be reported within Drilling Solutions.  The rig components operations along with other related products have been integrated into Canrig and therefore will be part of Rig Technologies’ results.

 

William Restrepo, Nabors’ Chief Financial Officer, commented, “We are pleased with our fourth quarter results and the progress made to date on our strategic initiatives.  Our adjusted EBITDA continued to increase driven mainly by higher pricing in the U.S.  The improved financial results together with our continued capex discipline allowed us to deliver essentially breakeven cash flow, even before the impact of net cash inflows from our strategic transactions.

 

“We expect our U.S. Lower 48 daily margins to improve by approximately $1,000 in the first quarter, as we add several more rigs to our working fleet.  Our International segment will benefit from incremental rigs; however, margins will diminish in the near term as a result of mix and rate adjustments on numerous multi-year contract extensions.  During the second half of 2018, we expect daily margins in this segment should revert to their long-term levels as our rig count increases and we benefit from additional high margin work.

 

“We will remain focused on cash flow generation and capex discipline. As our margins in the US continue to expand, our global rig count increases, and Drilling Solutions delivers incremental cash flow, we are targeting a slight reduction in net debt during 2018 followed by material increases in cash flow generation during 2019 and beyond.”

 

Mr. Petrello concluded, “I am increasingly encouraged by the progression of our results over the last four quarters.  This steady improvement and the increasingly favorable outlook across the majority of our markets bolsters my confidence in the validity of our performance, automation and services integration strategy.  The end result of which, as stated in our 2020 Vision, is to effect a large reduction in our financial leverage and restore attractive returns on capital. We anticipate significant progress throughout 2018 in U.S. Drilling and Drilling Solutions bolstered by more modest improvement in our International, Canada and Rig Technologies segments.

 

“While most of this improvement will come from increasing rig activity, lower costs and higher pricing, particularly in North America, we expect to see increasing contribution from our drilling performance offerings and expect to have a number of our automation initiatives commercialized by year-end 2018, further bolstering the outlook for 2019.”

 

About Nabors

 

Nabors Industries (NYSE: NBR) owns and operates one of the world’s largest land-based drilling rig fleets and is a provider of offshore platform rigs in the United States and numerous international markets. Nabors also provides directional drilling services, performance tools, and innovative technologies for its own rig fleet and those of third parties. 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 (loss) exclude certain cash expenses that the Company is obligated to make.  However, management evaluates the performance of its 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 the Company’s ongoing profitability and performance.  Securities analysts and investors also use these measures as some of the metrics on which they analyze the Company’s performance. Other companies in this 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 or Nick Swyka, Director of Corporate Development & Investor Relations, +1 281-775-2407.   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)

 

2017

 

2016

 

2017

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

708,277

 

$

538,948

 

$

662,103

 

$

2,564,285

 

$

2,227,839

 

Earnings (losses) from unconsolidated affiliates

 

1

 

4

 

4

 

7

 

(221,914

)

Investment income (loss)

 

986

 

260

 

373

 

1,194

 

1,183

 

Total revenues and other income

 

709,264

 

539,212

 

662,480

 

2,565,486

 

2,007,108

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

471,641

 

331,560

 

441,263

 

1,718,069

 

1,344,298

 

General and administrative expenses

 

59,070

 

52,603

 

65,010

 

251,184

 

227,639

 

Research and engineering

 

15,009

 

8,764

 

12,960

 

51,069

 

33,582

 

Depreciation and amortization

 

214,106

 

216,187

 

217,075

 

842,943

 

871,631

 

Interest expense

 

57,076

 

47,557

 

54,607

 

222,889

 

185,360

 

Impairments and other charges

 

23,416

 

257,671

 

3,247

 

44,536

 

498,499

 

Other, net

 

6,827

 

17,599

 

2,312

 

14,880

 

44,174

 

Total costs and other deductions

 

847,145

 

931,941

 

796,474

 

3,145,570

 

3,205,183

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(137,881

)

(392,729

)

(133,994

)

(580,084

)

(1,198,075

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(23,156

)

(62,533

)

(14,709

)

(82,970

)

(186,831

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(114,725

)

(330,196

)

(119,285

)

(497,114

)

(1,011,244

)

Income (loss) from discontinued operations, net of tax

 

(442

)

(4,266

)

(27,134

)

(43,519

)

(18,363

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(115,167

)

(334,462

)

(146,419

)

(540,633

)

(1,029,607

)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net (income) loss attributable to noncontrolling interest

 

(1,177

)

(1,125

)

(2,113

)

(6,178

)

(135

)

Net income (loss) attributable to Nabors

 

$

(116,344

)

$

(335,587

)

$

(148,532

)

$

(546,811

)

$

(1,029,742

)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Nabors:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(115,902

)

$

(331,321

)

$

(121,398

)

$

(503,292

)

$

(1,011,379

)

Net income (loss) from discontinued operations

 

(442

)

(4,266

)

(27,134

)

(43,519

)

(18,363

)

Net income (loss) attributable to Nabors

 

$

(116,344

)

$

(335,587

)

$

(148,532

)

$

(546,811

)

$

(1,029,742

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(0.40

)

$

(1.17

)

$

(0.42

)

$

(1.75

)

$

(3.58

)

Basic from discontinued operations

 

 

(0.01

)

(0.10

)

(0.15

)

(0.06

)

Total Basic

 

$

(0.40

)

$

(1.18

)

$

(0.52

)

$

(1.90

)

$

(3.64

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(0.40

)

$

(1.17

)

$

(0.42

)

$

(1.75

)

$

(3.58

)

Diluted from discontinued operations

 

 

(0.01

)

(0.10

)

(0.15

)

(0.06

)

Total Diluted

 

$

(0.40

)

$

(1.18

)

$

(0.52

)

$

(1.90

)

$

(3.64

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

286,603

 

276,793

 

279,313

 

280,653

 

276,475

 

Diluted

 

286,603

 

276,793

 

279,313

 

280,653

 

276,475

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

162,557

 

$

146,021

 

$

142,870

 

$

543,963

 

$

622,320

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss)

 

$

(51,549

)

$

(70,166

)

$

(74,205

)

$

(298,980

)

$

(249,311

)

 

1-1



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands)

 

2017

 

2017

 

2016

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

365,366

 

$

220,326

 

$

295,202

 

Accounts receivable, net

 

698,477

 

621,640

 

508,355

 

Assets held for sale

 

37,052

 

37,275

 

76,668

 

Other current assets

 

346,441

 

295,680

 

275,614

 

Total current assets

 

1,447,336

 

1,174,921

 

1,155,839

 

Property, plant and equipment, net

 

6,109,565

 

6,051,606

 

6,267,583

 

Goodwill

 

173,226

 

173,321

 

166,917

 

Other long-term assets

 

671,857

 

688,737

 

596,676

 

Total assets

 

$

8,401,984

 

$

8,088,585

 

$

8,187,015

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

 

$

181

 

$

196

 

$

297

 

Other current liabilities

 

919,295

 

830,478

 

821,637

 

Total current liabilities

 

919,476

 

830,674

 

821,934

 

Long-term debt

 

4,027,766

 

3,958,615

 

3,578,335

 

Other long-term liabilities

 

311,971

 

372,075

 

531,951

 

Total liabilities

 

5,259,213

 

5,161,364

 

4,932,220

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest in subsidiary

 

203,998

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

2,911,816

 

2,901,405

 

3,247,025

 

Noncontrolling interest

 

26,957

 

25,816

 

7,770

 

Total equity

 

2,938,773

 

2,927,221

 

3,254,795

 

Total liabilities and equity

 

$

8,401,984

 

$

8,088,585

 

$

8,187,015

 

 

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)

 

2017

 

2016

 

2017

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Technologies:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

233,198

 

$

148,959

 

$

222,747

 

$

805,223

 

$

554,072

 

Canada

 

19,927

 

16,917

 

18,073

 

82,929

 

51,472

 

International

 

381,393

 

343,259

 

374,106

 

1,474,060

 

1,508,890

 

Drilling Solutions

 

44,001

 

17,567

 

37,506

 

140,701

 

63,759

 

Rig Technologies (1)

 

79,249

 

46,092

 

50,032

 

234,542

 

151,951

 

Subtotal Drilling & Rig Technologies

 

757,768

 

572,794

 

702,464

 

2,737,455

 

2,330,144

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (2)

 

(49,491

)

(33,846

)

(40,361

)

(173,170

)

(102,305

)

Total operating revenues

 

$

708,277

 

$

538,948

 

$

662,103

 

$

2,564,285

 

$

2,227,839

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Technologies:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

53,618

 

$

49,245

 

$

43,256

 

$

161,294

 

$

190,657

 

Canada

 

4,253

 

2,647

 

2,570

 

17,335

 

5,325

 

International

 

128,902

 

128,289

 

136,839

 

509,181

 

576,049

 

Drilling Solutions

 

12,596

 

2,265

 

9,761

 

32,926

 

2,095

 

Rig Technologies (1)

 

(4,292

)

(1,351

)

(7,938

)

(19,434

)

(17,429

)

Subtotal Drilling & Rig Technologies

 

195,077

 

181,095

 

184,488

 

701,302

 

756,697

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (4)

 

(32,520

)

(35,074

)

(41,618

)

(157,339

)

(134,377

)

Total adjusted EBITDA

 

$

162,557

 

$

146,021

 

$

142,870

 

$

543,963

 

$

622,320

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

 

 

 

 

Drilling & Rig Technologies:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

(41,080

)

$

(42,947

)

$

(53,536

)

$

(213,877

)

$

(197,710

)

Canada

 

(5,743

)

(8,553

)

(7,494

)

(22,262

)

(36,818

)

International

 

27,964

 

20,351

 

32,316

 

108,428

 

164,677

 

Drilling Solutions

 

8,080

 

(2,463

)

5,864

 

16,738

 

(16,503

)

Rig Technologies (1)

 

(7,258

)

(2,783

)

(10,535

)

(30,964

)

(31,981

)

Subtotal Drilling & Rig Technologies

 

(18,037

)

(36,395

)

(33,385

)

(141,937

)

(118,335

)

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (4)

 

(33,512

)

(33,771

)

(40,820

)

(157,043

)

(130,976

)

Total adjusted operating income (loss)

 

$

(51,549

)

$

(70,166

)

$

(74,205

)

$

(298,980

)

$

(249,311

)

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Average Rigs Working: (6)

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

106.3

 

72.1

 

107.2

 

100.8

 

62.0

 

Canada

 

13.8

 

13.3

 

13.5

 

15.4

 

9.7

 

International

 

90.7

 

91.9

 

91.3

 

91.1

 

100.2

 

Total average rigs working

 

210.8

 

177.3

 

212.0

 

207.3

 

171.9

 

 

1-3



 


(1)                     Includes our oilfield equipment manufacturing, automated systems and downhole tools.

 

(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. In addition, adjusted EBITDA excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance. Securities analysts and investors use this measure as one of the metrics on which they analyze the Company’s performance.  Other companies in this 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. In addition, adjusted operating income (loss) excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance. Securities analysts and investors use this measure as one of the metrics on which they analyze the Company’s performance.  Other companies in this 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 a measure of the average number of rigs operating during a given period.  For example, one rig operating 45 days during a quarter represents approximately 0.5 average rigs working for the quarter.  On an annual period, one rig operating 182.5 days represents approximately 0.5 average rigs working for the year.

 

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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)

 

2017

 

2016

 

2017

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

162,557

 

$

146,021

 

$

142,870

 

$

543,963

 

$

622,320

 

Depreciation and amortization

 

(214,106

)

(216,187

)

(217,075

)

(842,943

)

(871,631

)

Adjusted operating income (loss)

 

(51,549

)

(70,166

)

(74,205

)

(298,980

)

(249,311

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

1

 

4

 

4

 

7

 

(221,914

)

Investment income (loss)

 

986

 

260

 

373

 

1,194

 

1,183

 

Interest expense

 

(57,076

)

(47,557

)

(54,607

)

(222,889

)

(185,360

)

Impairments and other charges

 

(23,416

)

(257,671

)

(3,247

)

(44,536

)

(498,499

)

Other, net

 

 

(6,827

)

 

(17,599

)

 

(2,312

)

 

(14,880

)

 

(44,174

)

Income (loss) from continuing operations before income taxes

 

$

(137,881

)

$

(392,729

)

$

(133,994

)

$

(580,084

)

$

(1,198,075

)

 

1-5



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands)

 

2017

 

2017

 

2016

 

 

 

(Unaudited)

 

 

 

Current portion of debt

 

$

181

 

$

196

 

$

297

 

Long-term debt

 

4,027,766

 

3,958,615

 

3,578,335

 

Total Debt

 

4,027,947

 

3,958,811

 

3,578,632

 

Less: Cash and short-term investments

 

365,366

 

220,326

 

295,202

 

Net Debt

 

$

3,662,581

 

$

3,738,485

 

$

3,283,430

 

 

1-6


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

4Q17 Earnings Presentation February 27, 2018 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 future markets, demand for our products and services, and our performance in our annual, quarterly, and current 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 and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. 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 should 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 renew customer contracts in in order to maintain competitiveness; the existence of operating risks inherent in the oil and gas and oilfield services industries; the possibility of the loss of one or a number of our large customers; the impact of long-term indebtedness and other financial commitments on our financial and operating flexibility; our access to and the cost of capital, including the impact of a downgrade in our credit rating, availability under our unsecured revolving credit facility, and future issuances of debt or equity securities; our dependence on our operating subsidiaries and investments to meet our financial obligations; our ability to retain skilled employees; our ability to complete, and realize the expected benefits of, strategic transactions, including our announced joint venture in Saudi Arabia and the transaction with Tesco Corporation; the possibility of changes in tax laws 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. Forward-Looking Statements and Non-GAAP Financial Measures

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3 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 on Form 10-K and Quarterly Reports on Form 10-Q, which are available at the SEC's website at www.sec.gov. 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. Forward-Looking Statements and Non-GAAP Financial Measures

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4 Recent Company Highlights Closed acquisition of Tesco Corporation in ~$180mm all-stock transaction (Dec 15, 2017) Commenced operations on SANAD joint venture with Saudi Aramco (Dec 1, 2017) Acquired Robotic Drilling Systems AS ("RDS") in September, a provider of automated tubular and tool handling equipment for the onshore and offshore drilling markets Increased U.S. segment average daily margins to $6,444 from $5,296 in the previous quarter Currently operating 107 rigs in the Lower 48 with the PACE®-X, PACE®-M800, and PACE®-M1000 rigs fully utilized, versus 101 average in Q4 Increased Nabors Drilling Solutions Adjusted EBITDA by 29% sequentially and achieved $50MM annual run-rate target Poised to begin MODS™ M-400 Rig (Big Foot) operations no later than April 1, 2018 Margin equivalent of approximately 20 onshore rigs

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5 Financial Overview

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6 Financial Summary See reconciliations in the Appendix Diluted Earnings (Losses) Per Share from continuing operations Includes impairments of $0.87 per share related to the impairment of certain assets and other charges ($000 except EPS) 4Q16 1Q17 2Q17 3Q17 4Q17 Operating Revenues $538,948 $562,550 $631,355 $662,103 $708,277 Adjusted EBITDA(1) 146,021 99,740 138,796 142,870 162,557 Adjusted Operating(1) Income (Loss) (70,166) (103,932) (69,294) (74,205) (51,549) GAAP Diluted EPS(2) (1.17)(3) (0.52) (0.41) (0.42) (0.40)

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Current Debt and Liquidity (As of December 31, 2017) (1) See reconciliations in the Appendix (2) Capitalization defined as Net Debt plus Shareholders’ Equity (3) Coverage defined as TTM Adjusted EBITDA / TTM Interest Expense (4) Leverage defined as Net Debt / TTM Adjusted EBITDA Note: Subtotals may not foot due to rounding Liquidity (at December 31, 2017) Cash & Available Capacity: $2,065 High 4Q16 3Q17 4Q17 Change ($MM's) 3/31/12 12/31/16 9/30/17 12/31/17 4Q17 from 3Q17 Total Debt $4,750 $3,579 $3,959 $4,028 $69 Cash and ST Investments 494 295 220 365 145 Net Debt(1) $4,256 $3,283 $3,738 $3,663 ($76) Shareholders’ Equity 5,811 3,247 2,901 2,912 10 Net Debt to Capitalization(2) 42% 50% 56% 56% (1%) Coverage(3) 7.8x 3.4x 2.5x 2.4x 0.0x Leverage(4) 2.2x 5.3x 7.1x 6.7x (0.4x)

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8 Business Segments

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Rig Fleet(1) 4Q17 Average Rigs Working Average Utilization U.S. Lower 48 AC > 1500HP 114 88 77% AC Others 72 10 14% SCR Rigs 24 3 13% U.S. Lower 48 Total 210 101 48% U.S. Offshore 14 2 17% Alaska 16 3 19% Canada 42 14 33% International 163 91 56% Subtotal 445 211 47% PACE®-R800 Rig Construction 1 PACE®-M1000 Rig Construction 2 Total Fleet 448 9 4Q17 Rig Utilization & Availability As of December 31st, 2017 Note: Subtotals may not foot due to rounding

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10 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 89 139 64% 6 20 30% 95 159 60% 5 27 19% 100 186 54% PACE X 47 47 100% 0 0 0% 47 47 100% 0 0 0% 47 47 100% PACE M800 6 6 100% 0 0 0% 6 6 100% 0 0 0% 6 6 100% PACE M1000 2 2 100% 0 0 0% 2 2 100% 0 0 0% 2 2 100% PACE B 21 29 72% 0 0 0% 21 29 72% 0 0 0% 21 29 72% PACE S 9 9 100% 2 2 100% 11 11 100% 0 0 0% 11 11 100% PACE F 0 4 0% 2 6 33% 2 10 20% 2 8 25% 4 18 22% PACE M550 3 30 10% 2 8 25% 5 38 13% 3 18 17% 8 56 14% Other AC Rigs 1 12 8% 0 4 0% 1 16 6% 0 1 0% 1 17 6% Legacy 0 3 0% 3 5 60% 3 8 38% 0 16 0% 3 24 13% Total 89 142 63% 9 25 36% 98 167 59% 5 43 12% 103 210 49% Lower 48 Rig Utilization by Type As of December 31, 2017

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11 Nabors Drilling Operations As of December 31, 2017 Total = 216 116 US 108 Colombia 8 Algeria 4 Ecuador 1 Saudi Arabia 45 Venezuela 5 Kuwait 3 Italy 1 Argentina 15 Oman 4 India 3 UAE 1 Canada 13 Kazakhstan 3 Mexico 2 Russia 0

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12 The New Nabors with Tesco Expanded Footprint and Doubled Patent Count NBR Only Tesco Only Both 15,300+ Employees ~1,000 New Employees 28 Active Countries 5 New Countries 450+ Patents ~Doubles Patent Count 2,600+ TDs Sold ~Doubles TD Footprint 2018 Initial Cost Synergy Target: $20mm Expected 2018 Cost Synergies: ~$25mm

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13 PACE®-M1000 - Nabors SMARTRigTM System Setting the New Gold Standard for Shale Drilling Pad Optimal Capability With Automated Walking System Side-SaddleTM Rig Configuration Hydraulic Raised Mast & Substructure Hook Load 1,000,000 lbs Setback 900,000 lbs Racking Capacity 30,000ft of 5-7/8” Drill Pipe RigtelligentTM - Integrated Operating System NDS-ReadyTM Package 1 2 3 4 5 1 2 3 4 6 6 5 7 8 7 8 All four PACE®-M1000’s now deployed with major operators, three in W. Texas, one in Eagle Ford at rates in the low-to-mid $20,000s

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14 Appendix

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15 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. 1Q17 2Q17 3Q17 4Q17 Drilling Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working U.S. Drilling $4,484 88.8 $5,071 100.6 $5,296 107.2 $6,444 106.3 Canada 3,985 22.0 5,136 12.4 3,497 13.5 4,650 13.8 International 15,434 89.8 17,788 92.7 18,233 91.3 17,213 90.7

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16 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. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to pay. 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 its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance. Securities analysts and investors use these measures as some of the metrics on which they analyze the Company’s performance. Other companies in this 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 is the nearest comparable GAAP financial measure, is provided in the table below. Three Months Ended December 31, March 31, June 30, September 30, December 31, (In Thousands) 2016 2017 2017 2017 2017 Adjusted EBITDA $146,021 $99,740 $138,796 $142,870 162,557 Depreciation and Amortization (216,187) (203,672) (208,090) (217,075) (214,106) Adjusted Operating Income (loss) (70,166) (103,932) (69,294) (74,205) (51,549) Earnings (losses) from unconsolidated affiliates 4 2 0 4 1 Investment Income (loss) 260 721 (886) 373 986 Interest Expense (47,557) (56,518) (54,688) (54,607) (57,076) Other, net (275,270) (13,510) (10,104) (5,559) (30,243) Income (loss) from continuing operations before income taxes ($392,729) ($173,237) ($134,972) ($133,994) (137,881)

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17 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 its operating segments and the consolidated Company based on several criteria, including net debt, because it believes that this financial measure accurately measures the Company’s 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 this industry may compute this measure differently. A reconciliation of net debt to total debt, which is the nearest comparable GAAP financial measure, is provided in the table below. (In Thousands) March 31, 2012 December 31, 2016 September 30, 2017 December 31, 2017 Long-Term Debt $4,474,495 $3,578,335 $3,958,615 $4,027,766 Current Debt 275,616 297 196 181 Total Debt $4,750,111 $3,578,632 $3,958,811 $4,027,947 Cash & Cash Equivalents $354,022 $264,093 $190,556 $336,997 ST Investments 139,950 31,109 29,770 28,369 Net Debt $4,256,139 $3,283,430 $3,738,485 $3,662,581

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