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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) May 1, 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 May 1, 2018, Nabors Industries Ltd. (“Nabors” or the “Company”) issued a press release announcing its results of operations for the three-month period ended March 31, 2018.  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.

 

On May 2, 2018, Nabors will hold a conference call at 10:00 a.m. central time, regarding the Company’s financial results for the first quarter ended March 31, 2018. Information about the call — including dial-in information, recording and replay of the call, and supplemental information — is available on the Investor Relations page of www.nabors.com.

 

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.

 

2



 

Item 7.01                                           Regulation FD Disclosure.

 

On May 2, 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.

 

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: May 1, 2018

By:

/s/Mark D. Andrews

 

 

Mark D. Andrews

 

 

Corporate Secretary

 

5


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

NEWS RELEASE

 

Nabors Announces First Quarter Results

 

HAMILTON, Bermuda, May 1, 2018 /PRNewswire/ — Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported first quarter 2018 operating revenue of $734 million, compared to operating revenue of $708 million in the prior quarter.  Net income from continuing operations attributable to Nabors for the quarter was a loss of $144 million, or $0.46 per share, compared to a loss of $116 million, or $0.40 per share, in the fourth quarter of 2017.  Results for the first quarter included transaction charges of $7.4 million, or $0.02 per share and a sequential increase in non-cash tax expense of $46 million, or $0.15 per share.

 

Anthony Petrello, Nabors Chairman and CEO, commented, “Our first quarter results showed continued improvement, primarily attributable to the outstanding performance of our US Drilling segment.  Canada Drilling also contributed meaningfully with the higher activity of the winter drilling season.  Our Drilling Solutions segment continued to achieve solid growth and remains on track to meet its annualized fourth quarter 2018 adjusted EBITDA objective of $100 million.  Internationally, our results declined slightly with lower average margins partially offset by four additional rigs working.  Rig Technologies came in well short of our expectations, principally due to delayed completion and shipment into April of numerous third-party legacy Tesco capital equipment orders.  The related logistics and manufacturing issues are resolved at our Tesco Calgary facility and we do not expect them to recur in the second quarter. We anticipate further improvements in all of our non-seasonal segments in the coming quarters.”

 

Consolidated and Segment Results

 

Adjusted operating income for the Company was a loss of $45 million during the quarter, as compared to a loss of $52 million in the fourth quarter of 2017.  Quarterly consolidated adjusted EBITDA represented an increase at $168 million, compared to $163 million in the fourth quarter.  During the first quarter, the Company averaged 228 rigs operating at an average gross margin of $11,470 per rig day.  This compares to 211 rigs at $10,963 per rig day in the fourth quarter of 2017.

 

The U.S. Drilling segment posted a 36% sequential increase in adjusted EBITDA, which equaled $73.1 million for the quarter.  This was driven by an increase of 6 rigs working and a 27% increase in average gross margin per rig day.  Virtually all of this increase in gross margin was attributable to the performance of the US lower 48 operation, which achieved an increase of approximately $2,000 per rig day.  The majority of this increase in lower 48 margins was attributable to reduced costs.  An increase in average dayrates also contributed meaningfully to the margin improvement.    In addition, on April 1, our MODS-400 deepwater platform rig commenced full operating rate on the Bigfoot deepwater offshore in the U.S. Gulf of Mexico.  This together with a recent contract award for an existing offshore platform rig and prospects for more should significantly boost near-term results.

 



 

International Drilling adjusted EBITDA decreased sequentially by $4.9 million to $124 million.  This decrease arose from the net effects of a quarterly increase in rig activity that was more than offset by lower average margins.  Average rig margins per day decreased by $594 largely attributable to a significant amount of previously announced long-term contract renewals at rates closer to market.  The quarterly average rig count increased by four to 94.6, representing the first significant increase in five quarters.   This appears to mark the beginning of a significant ramp up in activity over the course of the year.  Rig activity has been expanding with eight additional rigs scheduled to start before year-end and a number of proposals submitted or in process.  The market for higher spec international rigs is tightening and we expect rates for these rigs to increase as the year progresses.

 

Canada Drilling operations posted a seasonal high in adjusted EBITDA of $9.3 million amounting to a 120% sequential increase.  The quarter’s results also represented an increase of nearly 50% over the seasonally high first quarter of the prior year. The sequential improvement was attributable to higher rig activity, while the year-over-year growth arose from an increase in average per rig day margins on a flat rig count.  The Company expects a similar degree of improvement in adjusted EBITDA for the full year 2018.

 

In Drilling Solutions, adjusted EBITDA of $14.7 million represented a 17% quarterly increase. The results reflected higher activity across nearly all of the segment’s product lines during the quarter, as well as increased contribution from Tesco’s casing running services.  The segment again increased its penetration on both Nabors and third party rigs.  During the quarter, it also achieved two significant milestones that bolster the Company’s expectations for the future.  Specifically, it conducted the first commercial operations for two key customers with its Navigator and Rockit® Pilot software, which facilitates directional drilling automation.  Additionally, Drilling Solutions worked with Canrig on the first successful field test of the rotary steerable system on a customer well.  This segment remains on track to achieve its annualized fourth-quarter 2018 goal of $100 million in adjusted EBITDA.

 

In the Rig Technologies segment, first quarter adjusted EBITDA was a loss of $8.7 million, down by $4.4 million compared to the fourth quarter. This shortfall was principally attributable to manufacturing issues, which induced delays in completing and shipping several capital equipment items - primarily six top drives - from the Calgary facility.  Most of these delayed units were completed and shipped in the first month of the second quarter.  The company expects the traditional capital equipment portion of the segment to return to positive adjusted EBITDA in the second quarter.  Meanwhile, both the robotics and rotary steerable developmental product lines achieved significant milestones during the quarter.  The robotics group received a contract for engineering work in advance of what it expects will be its first commercial order for a complete offshore rig floor automation system.  The award is from a large North Sea operator and encompasses the planning required to retrofit an offshore platform in mid-2019.  The rotary steerable group successfully conducted its first field test on a customer’s well in South Texas for a large US E&P operator.  We believe commercialization of both product lines remains on track for late 2018.

 

William Restrepo, Nabors Chief Financial Officer, stated, “In general, our results continued the trends of the fourth quarter with strong overall drilling results, particularly in North America, and

 



 

continued growth in NDS. Our International rig count is picking up fast, although pricing still lags. Finally, sluggish shipments of drilling equipment provided a temporary headwind.

 

Net debt increased by $200 million in the first quarter, which was $100 million more than anticipated due to cash outlays that should not recur in the second quarter. Among these were an increase of working capital associated with the initiation of SANAD operations, transaction costs and slower collections related to the Tesco acquisition, the customary first quarter spike in payroll expense, and fees associated with our bond issuance.  The timing of our semiannual major interest payments also weighed on the first quarter’s cash flow.  We expect to generate positive cash flow in the second quarter exclusive of any proceeds from the potential sale of the first tranche of our Middle East jackups.  Further, we expect the increasing growth in consolidated adjusted EBITDA, along with other positive developments will lead to positive cash flow for the full year 2018.”

 

Mr. Petrello concluded, “This quarter represents the first full quarter of operations by SANAD, our land drilling joint venture in Saudi Arabia.  I would like to express how pleased our entire organization is with the efficiency of the integration and most importantly, the level of cooperation from our partner, Saudi Aramco.

 

“Regarding the other facets of our operations, I am particularly pleased with the substantial progress achieved in improving the profitability of our US lower 48 operations.  Our expectation of continued progress, in combination with the increasingly favorable outlook for all of our other segments, reinforces our confidence in achieving our vision 2020 goals of reducing our leverage and restoring returns on capital.  The near-term presents some challenges.  But absent a sharp contraction in oil prices, I believe as the year progresses we could experience each of our operations growing concurrently, a rather rare occurrence during my time at Nabors.”

 

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.  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

 

 

 

March 31,

 

December 31,

 

(In thousands, except per share amounts)

 

2018

 

2017

 

2017

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

Operating revenues

 

$

734,194

 

$

562,550

 

$

708,277

 

Earnings (losses) from unconsolidated affiliates

 

2

 

2

 

1

 

Investment income (loss)

 

465

 

721

 

986

 

Total revenues and other income

 

734,661

 

563,273

 

709,264

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

Direct costs

 

475,403

 

387,644

 

471,641

 

General and administrative expenses

 

74,571

 

63,409

 

59,070

 

Research and engineering

 

15,806

 

11,757

 

15,009

 

Depreciation and amortization

 

213,448

 

203,672

 

214,106

 

Interest expense

 

61,386

 

56,518

 

57,076

 

Other, net

 

14,089

 

13,510

 

30,243

 

Total costs and other deductions

 

854,703

 

736,510

 

847,145

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(120,042

)

(173,237

)

(137,881

)

Income tax expense (benefit)

 

23,545

 

(25,609

)

(23,156

)

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(143,587

)

(147,628

)

(114,725

)

Income (loss) from discontinued operations, net of tax

 

(75

)

(439

)

(442

)

 

 

 

 

 

 

 

 

Net income (loss)

 

(143,662

)

(148,067

)

(115,167

)

Less: Net (income) loss attributable to noncontrolling interest

 

(539

)

(917

)

(1,177

)

Net income (loss) attributable to Nabors

 

$

(144,201

)

$

(148,984

)

$

(116,344

)

 

 

 

 

 

 

 

 

Amounts attributable to Nabors:

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(144,126

)

$

(148,545

)

$

(115,902

)

Net income (loss) from discontinued operations

 

(75

)

(439

)

(442

)

Net income (loss) attributable to Nabors

 

$

(144,201

)

$

(148,984

)

$

(116,344

)

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(0.46

)

$

(0.52

)

$

(0.40

)

Basic from discontinued operations

 

 

 

 

Total Basic

 

$

(0.46

)

$

(0.52

)

$

(0.40

)

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(0.46

)

$

(0.52

)

$

(0.40

)

Diluted from discontinued operations

 

 

 

 

Total Diluted

 

$

(0.46

)

$

(0.52

)

$

(0.40

)

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

 

308,788

 

277,781

 

286,603

 

Diluted

 

308,788

 

277,781

 

286,603

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

168,414

 

$

99,740

 

$

162,557

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss)

 

$

(45,034

)

$

(103,932

)

$

(51,549

)

 

1-1



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

December 31,

 

(In thousands)

 

2018

 

2017

 

 

 

(Unaudited)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and short-term investments

 

$

393,587

 

$

365,366

 

Accounts receivable, net

 

733,541

 

698,477

 

Assets held for sale

 

36,404

 

37,052

 

Other current assets

 

330,841

 

346,441

 

Total current assets

 

1,494,373

 

1,447,336

 

Property, plant and equipment, net

 

5,969,063

 

6,109,565

 

Goodwill

 

172,982

 

173,226

 

Other long-term assets

 

663,412

 

671,857

 

Total assets

 

$

8,299,830

 

$

8,401,984

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of debt

 

$

375

 

$

181

 

Other current liabilities

 

766,453

 

919,295

 

Total current liabilities

 

766,828

 

919,476

 

Long-term debt

 

4,256,160

 

4,027,766

 

Other long-term liabilities

 

333,438

 

311,971

 

Total liabilities

 

5,356,426

 

5,259,213

 

 

 

 

 

 

 

Redeemable noncontrolling interest in subsidiary

 

206,396

 

203,998

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Shareholders’ equity

 

2,709,608

 

2,911,816

 

Noncontrolling interest

 

27,400

 

26,957

 

Total equity

 

2,737,008

 

2,938,773

 

Total liabilities and equity

 

$

8,299,830

 

$

8,401,984

 

 

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

 

 

 

March 31,

 

December 31,

 

(In thousands, except rig activity)

 

2018

 

2017

 

2017

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

U.S. Drilling

 

$

241,002

 

$

161,934

 

$

233,198

 

Canada Drilling

 

31,887

 

27,808

 

19,927

 

International Drilling

 

368,845

 

338,223

 

381,393

 

Drilling Solutions

 

62,648

 

27,365

 

44,001

 

Rig Technologies (1)

 

64,669

 

44,076

 

79,249

 

Other reconciling items (2)

 

(34,857

)

(36,856

)

(49,491

)

Total operating revenues

 

$

734,194

 

$

562,550

 

$

708,277

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

U.S. Drilling

 

$

73,067

 

$

26,629

 

$

53,618

 

Canada Drilling

 

9,299

 

6,335

 

4,253

 

International Drilling

 

123,990

 

108,656

 

128,902

 

Drilling Solutions

 

14,728

 

2,946

 

12,596

 

Rig Technologies (1)

 

(8,684

)

(5,053

)

(4,292

)

Other reconciling items (4)

 

(43,986

)

(39,773

)

(32,520

)

Total adjusted EBITDA

 

$

168,414

 

$

99,740

 

$

162,557

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

U.S. Drilling

 

$

(19,746

)

$

(63,182

)

$

(41,080

)

Canada Drilling

 

(592

)

(4,011

)

(5,743

)

International Drilling

 

24,536

 

11,974

 

27,964

 

Drilling Solutions

 

8,721

 

(978

)

8,080

 

Rig Technologies (1)

 

(12,976

)

(8,131

)

(7,258

)

Other reconciling items (4)

 

(44,977

)

(39,604

)

(33,512

)

Total adjusted operating income (loss)

 

$

(45,034

)

$

(103,932

)

$

(51,549

)

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

Average Rigs Working: (6)

 

 

 

 

 

 

 

U.S. Drilling

 

111.8

 

88.8

 

106.3

 

Canada Drilling

 

21.1

 

22.0

 

13.8

 

International Drilling

 

94.6

 

89.8

 

90.7

 

Total average rigs working

 

227.5

 

200.6

 

210.8

 

 

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

 

 

 

March 31,

 

December 31,

 

(In thousands)

 

2018

 

2017

 

2017

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

168,414

 

$

99,740

 

$

162,557

 

Depreciation and amortization

 

(213,448

)

(203,672

)

(214,106

)

Adjusted operating income (loss)

 

(45,034

)

(103,932

)

(51,549

)

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

2

 

2

 

1

 

Investment income (loss)

 

465

 

721

 

986

 

Interest expense

 

(61,386

)

(56,518

)

(57,076

)

Other, net

 

(14,089

)

(13,510

)

(30,243

)

Income (loss) from continuing operations before income taxes

 

$

(120,042

)

$

(173,237

)

$

(137,881

)

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

March 31,

 

December 31,

 

(In thousands)

 

2018

 

2017

 

 

 

(Unaudited)

 

Current portion of debt

 

$

375

 

$

181

 

Long-term debt

 

4,256,160

 

4,027,766

 

Total Debt

 

4,256,535

 

4,027,947

 

Less: Cash and short-term investments

 

393,587

 

365,366

 

Net Debt

 

$

3,862,948

 

$

3,662,581

 

 

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Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

 

1Q18 Earnings Presentation May 2, 2018 Presented by: Anthony G. Petrello Chairman, President, & Chief Executive Officer William J. Restrepo Chief Financial Officer

 


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 oil and natural gas; fluctuations in levels of oil and natural gas 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, covenants restrictions, 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 recent changes in U.S. tax laws and the possibility of changes in other 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 Increased U.S. Drilling segment average daily margins to $8,171 from $6,444 in the previous quarter L48 Margins increased to $6,938 from $4,978, a 39% sequential increase Increased Drilling Solutions adjusted EBITDA by 17% sequentially and progressed towards achieving the Q4 2018 $100MM annual run-rate target Increased integrated Tubular Service jobs on Nabors’ rigs by 75% Completed first revenue generating jobs for ROCKit® Pilot with two customers in the Permian Basin MODS™ M-400 Rig (Big Foot) commenced operations on April 1, 2018 Forecasted to significantly enhance US offshore adjusted EBITDA and margin from Q1 run rate International Drilling average rig count grew from 91 to 95 rigs sequentially

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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 ($000 except EPS) 1Q17 2Q17 3Q17 4Q17 1Q18 Operating Revenues $562,550 $631,355 $662,103 $708,277 $734,194 Adjusted EBITDA(1) 99,740 138,796 142,870 162,557 168,414 Adjusted Operating(1) Income (Loss) (103,932) (69,294) (74,205) (51,549) (45,034) GAAP Diluted EPS(2) (0.52) (0.41) (0.42) (0.40) (0.46)

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Current Debt and Liquidity (As of March 31, 2018) (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 March 31, 2018) Cash & Available Capacity: $2,199 High 1Q17 4Q17 1Q18 Change ($MM's) 3/31/12 1/31/17 12/31/17 3/31/18 1Q18 from 4Q17 Total Debt $4,750 $3,662 $4,028 $4,257 $229 Cash and ST Investments 494 229 365 394 28 Net Debt(1) $4,256 $3,433 $3,663 $3,863 $200 Shareholders’ Equity 5,811 3,178 2,912 2,710 (202) Net Debt to Capitalization(2) 42.3% 51.9% 55.7% 58.8% 3.1% Coverage(3) 7.8x 2.9x 2.4x 2.7x 0.2x Leverage(4) 2.2x 6.1x 6.7x 6.3x (0.4x)

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8 Business Segments

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Rig Fleet(1) 1Q18 Average Rigs Working Average Utilization U.S. Lower 48 AC > 1500HP 116 93 80% AC Others 72 9 13% SCR Rigs 24 3 13% U.S. Lower 48 Total 212 106 50% U.S. Offshore 14 3 19% Alaska 16 4 23% Canada 42 21 50% International 161 95 59% Subtotal 445 228 51% PACE®-R800 Rig Construction 1 Total Fleet 446 9 1Q18 Rig Utilization & Availability As of March 31st, 2018 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 93 141 66% 6 20 30% 99 161 61% 5 27 19% 104 188 55% 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 4 4 100% 0 0 0% 4 4 100% 0 0 0% 4 4 100% PACE® B 23 29 79% 0 0 0% 23 29 79% 0 0 0% 23 29 79% 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 93 144 65% 9 25 36% 102 169 60% 5 43 12% 107 212 50% Lower 48 Rig Utilization by Type As of March 31, 2018

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11 Nabors Drilling Operations As of March 31, 2018 Total = 219 116 US 114 Colombia 8 India 4 Italy 1 Saudi Arabia(1) 44 Venezuela 5 Algeria 3 Ecuador 0 Argentina 15 Oman 4 Kuwait 3 UAE 0 Canada 12 Kazakhstan 4 Mexico 2 Russia 0 (1) Includes offshore jackup rigs

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12 Appendix

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13 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. 2Q17 3Q17 4Q17 1Q18 Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working U.S. Drilling $5,071 100.6 $5,296 107.2 $6,444 106.3 $8,171 111.8 Canada Drilling 5,136 12.4 3,497 13.5 4,650 13.8 5,847 21.1 International Drilling 17,788 92.7 18,233 91.3 17,213 90.7 16,619 94.6

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14 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 March 31, June 30, September 30, December 31, March 31, (In Thousands) 2017 2017 2017 2017 2018 Adjusted EBITDA $99,740 $138,796 $142,870 162,557 168,414 Depreciation and Amortization (203,672) (208,090) (217,075) (214,106) (213,448) Adjusted Operating Income (loss) (103,932) (69,294) (74,205) (51,549) (45,034) Earnings (losses) from unconsolidated affiliates 2 0 4 1 2 Investment Income (loss) 721 (886) 373 986 465 Interest Expense (56,518) (54,688) (54,607) (57,076) (61,386) Other, net (13,510) (10,104) (5,559) (30,243) (14,089) Income (loss) from continuing operations before income taxes ($173,237) ($134,972) ($133,994) (137,881) (120,042)

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15 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 March 31, 2017 December 31, 2017 March 31, 2018 Long-Term Debt $4,474,495 $3,661,665 $4,027,766 $4,256,160 Current Debt 275,616 313 181 375 Total Debt $4,750,111 $3,661,978 $4,027,947 $4,256,535 Cash & Cash Equivalents $354,022 $200,688 $336,997 $367,039 ST Investments 139,950 27,907 28,369 26,548 Net Debt $4,256,139 $3,433,383 $3,662,581 $3,862,948

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