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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) July 31, 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 July 31, 2018, Nabors Industries Ltd. (“Nabors” or the “Company”) issued a press release announcing its results of operations for the three-month period ended June 30, 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 August 1, 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 June 30, 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 August 1, 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



 

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: July 31, 2018

By:

/s/Mark D. Andrews

 

 

Mark D. Andrews

 

 

Corporate Secretary

 

4


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

NEWS RELEASE

 

Nabors Announces Second Quarter Results

 

HAMILTON, Bermuda, July 31, 2018 /PRNewswire/ — Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported second quarter 2018 operating revenue of $762 million, compared to operating revenue of $734 million in the first quarter, a 4% increase.  Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $202 million, or $0.61 per share, compared to a loss of $144 million, or $0.46 per share, in the prior quarter.  Results for the second quarter included a loss on the sale of Middle East offshore rigs of $63.7 million (or $0.20 per share, after tax) and transaction charges of $5.9 million ($0.02 per share, after tax).

 

Anthony Petrello, Nabors Chairman and CEO, commented, “The second quarter either largely matched or exceeded our expectations.  We continued to make significant progress in all of our segments, with especially strong results in U.S. Drilling.  The main highlights of the quarter were numerous rate increases in the Lower 48, as contracts rolled over, with a corresponding increase in daily margins to $7,400; the startup of our MODSTM 400 platform rig in the Gulf of Mexico; and a sharp rebound in Rig Technologies.

 

“We completed an equity issuance which reduced our leverage.  We also sold three of our Saudi Arabia jackups.  For these two transactions, the combined proceeds and corresponding net debt reduction was approximately $660 million.  As we had forecasted, we generated positive cash flow before these two transactions, demonstrating our commitment to capital discipline, cash generation and reducing our leverage.

 

“During the second quarter, we secured awards for 13 incremental rigs globally.  We signed three-year contracts for six upgraded rigs with one operator to be deployed progressively through January 2019, and received awards for three more, all for operations in the Permian.  We are in discussions for additional upgraded rigs with operators in multiple basins in the Lower 48.  In the international markets, we were awarded four incremental rigs and are negotiating with customers for additional rigs.  Across our global markets, demand for high-specification rigs is increasing.  With our inventory of readily available rigs internationally and upgradable rigs in the Lower 48, this should translate into a high success rate.”

 

Consolidated and Segment Results

 

Adjusted operating income for the Company was a loss of $31 million during the quarter, compared to a loss of $45 million in the first quarter.  Quarterly consolidated adjusted EBITDA increased to $188 million compared to $168 million in the previous quarter, an 11% increase.  During the second quarter, the Company averaged 215 rigs operating at an average gross margin of $12,262 per rig day.  This compares to 228 rigs at $11,470 per rig day in the first quarter.  The reduction in rig count primarily reflects reduced seasonal activity in Canada.

 

The U.S. Drilling segment reported a 19% sequential increase in adjusted EBITDA, to $87 million.  Much of the increase is attributable to the April 1 commencement of full operating rate

 



 

on the MODSTM 400 deepwater platform rig in the Gulf of Mexico.  In the Lower 48, average daily gross margin increased by more than $450 to $7,400, while rig count was stable.  Higher daily operating rates and improved rig-move efficiency accounted for the margin increase.

 

International Drilling adjusted EBITDA decreased sequentially by $1.4 million, to $123 million.  Quarterly rig count declined by 1.5 to 93.  The sale of the jackups in early June accounted for just under a one rig reduction.  The expiration of the contract for a rig in India was partially offset by the start of four rigs in Colombia, very late in the quarter.  Margin per day decreased from $16,600 to $16,350 on the partial absence of the Saudi jackup activity, including one jackup which was off rate in the shipyard.  During the third quarter, Nabors will experience the full quarter impact of the Saudi jackup sale.

 

Canada Drilling operations posted a seasonal decline in adjusted EBITDA to $5.0 million from $9.3 million in the first quarter.  Daily gross margin increased 14% to $6,600, due primarily to the shift toward higher-spec rigs during the spring breakup period.

 

In Drilling Solutions, adjusted EBITDA of $14.8 million was essentially in line with the prior quarter, despite a $2.8 million reduction in revenue.  The seasonal decline in Canada rig count had a negative impact on performance software revenue.  During the quarter the Company made significant advances on its plans to rationalize its presence in various low-margin geographies and product lines added with the Tesco acquisition.  Next quarter, the Company expects to increase adjusted EBITDA on its way to achieving its fourth quarter target.

 

In the Rig Technologies segment, second quarter adjusted EBITDA improved to $0.4 million compared to a loss of $8.7 million in the first quarter.  Several shipments of capital equipment — six top drives — were delayed during the first quarter and shipped during the second quarter. Aftermarket sales also increased during the second quarter.

 

William Restrepo, Nabors Chief Financial Officer, stated, “Net debt decreased by $681 million in the second quarter to just under $3.2 billion, primarily due to the proceeds from the issuance of equity which amounted to $581 million.  We ended the quarter with the revolving credit facility undrawn.  The sale of offshore rigs in the Middle East netted proceeds of approximately $82 million, including approximately $62 million in cash.  Excluding the impact of these transactions, Nabors generated cash flow of $18 million during the second quarter.  In early July, we redeemed the remaining $303 million of our 9.25% senior notes outstanding.  Our next debt maturities are not until the second half of 2020.  For the balance of 2018, we expect our operating results and other favorable developments will lead to positive cash flow for the full year 2018.”

 

Mr. Petrello concluded, “Our results should continue to improve.  We are optimistic that demand in our global markets will continue to strengthen.  In the near term, Lower-48 pricing continues to increase.  We expect to add rigs to our global fleet by year end, in addition to the seasonal recovery in Canada.  Our integration and automation initiatives should continue to drive growth in our Nabors Drilling Solutions and Rig Technologies Segments.”

 

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 William Conroy, Senior Director of Corporate Development & Investor Relations, +1 281-775-2423.   To request investor materials, contact Nabors’ corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail at [email protected]

 



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

March 31,

 

June 30,

 

(In thousands, except per share amounts)

 

2018

 

2017

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

761,920

 

$

631,355

 

$

734,194

 

$

1,496,114

 

$

1,193,905

 

Earnings (losses) from unconsolidated affiliates

 

(1

)

 

2

 

1

 

2

 

Investment income (loss)

 

(3,164

)

(886

)

465

 

(2,699

)

(165

)

Total revenues and other income

 

758,755

 

630,469

 

734,661

 

1,493,416

 

1,193,742

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

493,975

 

417,521

 

475,403

 

969,378

 

805,165

 

General and administrative expenses

 

67,823

 

63,695

 

74,571

 

142,394

 

127,104

 

Research and engineering

 

12,439

 

11,343

 

15,806

 

28,245

 

23,100

 

Depreciation and amortization

 

218,262

 

208,090

 

213,448

 

431,710

 

411,762

 

Interest expense

 

60,592

 

54,688

 

61,386

 

121,978

 

111,206

 

Other, net

 

77,601

 

10,104

 

14,089

 

91,690

 

23,614

 

Total costs and other deductions

 

930,692

 

765,441

 

854,703

 

1,785,395

 

1,501,951

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(171,937

)

(134,972

)

(120,042

)

(291,979

)

(308,209

)

Income tax expense (benefit)

 

23,278

 

(19,496

)

23,545

 

46,823

 

(45,105

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(195,215

)

(115,476

)

(143,587

)

(338,802

)

(263,104

)

Income (loss) from discontinued operations, net of tax

 

(584

)

(15,504

)

(75

)

(659

)

(15,943

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(195,799

)

(130,980

)

(143,662

)

(339,461

)

(279,047

)

Less: Net (income) loss attributable to noncontrolling interest

 

(2,953

)

(1,971

)

(539

)

(3,492

)

(2,888

)

Net income (loss) attributable to Nabors

 

$

(198,752

)

$

(132,951

)

$

(144,201

)

$

(342,953

)

$

(281,935

)

Less: Preferred stock dividend

 

$

(3,680

)

$

 

$

 

$

(3,680

)

$

 

Net income (loss) attributable to Nabors common shareholders

 

$

(202,432

)

$

(132,951

)

$

(144,201

)

$

(346,633

)

$

(281,935

)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Nabors common shareholders:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(201,848

)

$

(117,447

)

$

(144,126

)

$

(345,974

)

$

(265,992

)

Net income (loss) from discontinued operations

 

(584

)

(15,504

)

(75

)

(659

)

(15,943

)

Net income (loss) attributable to Nabors common shareholders

 

$

(202,432

)

$

(132,951

)

$

(144,201

)

$

(346,633

)

$

(281,935

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(0.61

)

$

(0.41

)

$

(0.46

)

$

(1.08

)

$

(0.93

)

Basic from discontinued operations

 

 

(0.05

)

 

 

(0.06

)

Total Basic

 

$

(0.61

)

$

(0.46

)

$

(0.46

)

$

(1.08

)

$

(0.99

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(0.61

)

$

(0.41

)

$

(0.46

)

$

(1.08

)

$

(0.93

)

Diluted from discontinued operations

 

 

(0.05

)

 

 

(0.06

)

Total Diluted

 

$

(0.61

)

$

(0.46

)

$

(0.46

)

$

(1.08

)

$

(0.99

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

328,372

 

278,916

 

308,788

 

318,580

 

278,348

 

Diluted

 

328,372

 

278,916

 

308,788

 

318,580

 

278,348

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

187,683

 

$

138,796

 

$

168,414

 

$

356,097

 

$

238,536

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss)

 

$

(30,579

)

$

(69,294

)

$

(45,034

)

$

(75,613

)

$

(173,226

)

 

1-1



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

 

March 31,

 

December 31,

 

(In thousands)

 

2018

 

2018

 

2017

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

636,546

 

$

393,587

 

$

365,366

 

Accounts receivable, net

 

780,247

 

733,541

 

698,477

 

Assets held for sale

 

35,963

 

36,404

 

37,052

 

Other current assets

 

329,715

 

330,841

 

346,441

 

Total current assets

 

1,782,471

 

1,494,373

 

1,447,336

 

Property, plant and equipment, net

 

5,709,895

 

5,969,063

 

6,109,565

 

Goodwill

 

172,817

 

172,982

 

173,226

 

Other long-term assets

 

635,105

 

663,412

 

671,857

 

Total assets

 

$

8,300,288

 

$

8,299,830

 

$

8,401,984

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

 

$

243

 

$

375

 

$

181

 

Other current liabilities

 

873,539

 

766,453

 

919,295

 

Total current liabilities

 

873,782

 

766,828

 

919,476

 

Long-term debt

 

3,818,613

 

4,256,160

 

4,027,766

 

Other long-term liabilities

 

310,726

 

333,438

 

311,971

 

Total liabilities

 

5,003,121

 

5,356,426

 

5,259,213

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest in subsidiary

 

208,519

 

206,396

 

203,998

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

3,063,034

 

2,709,608

 

2,911,816

 

Noncontrolling interest

 

25,614

 

27,400

 

26,957

 

Total equity

 

3,088,648

 

2,737,008

 

2,938,773

 

Total liabilities and equity

 

$

8,300,288

 

$

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

 

Six Months Ended

 

 

 

June 30,

 

March 31,

 

June 30,

 

(In thousands, except rig activity)

 

2018

 

2017

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

264,395

 

$

187,344

 

$

241,002

 

$

505,397

 

$

349,278

 

Canada Drilling

 

17,442

 

17,121

 

31,887

 

49,329

 

44,929

 

International Drilling

 

377,986

 

380,338

 

368,845

 

746,831

 

718,561

 

Drilling Solutions

 

59,859

 

31,829

 

62,648

 

122,507

 

59,194

 

Rig Technologies (1)

 

81,321

 

61,185

 

64,669

 

145,990

 

105,261

 

Other reconciling items (2)

 

(39,083

)

(46,462

)

(34,857

)

(73,940

)

(83,318

)

Total operating revenues

 

$

761,920

 

$

631,355

 

$

734,194

 

$

1,496,114

 

$

1,193,905

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

86,923

 

$

37,791

 

$

73,067

 

$

159,990

 

$

64,420

 

Canada Drilling

 

4,963

 

4,177

 

9,299

 

14,262

 

10,512

 

International Drilling

 

122,631

 

134,784

 

123,990

 

246,621

 

243,440

 

Drilling Solutions

 

14,765

 

7,623

 

14,728

 

29,493

 

10,569

 

Rig Technologies (1)

 

446

 

(2,151

)

(8,684

)

(8,238

)

(7,204

)

Other reconciling items (4)

 

(42,045

)

(43,428

)

(43,986

)

(86,031

)

(83,201

)

Total adjusted EBITDA

 

$

187,683

 

$

138,796

 

$

168,414

 

$

356,097

 

$

238,536

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

(13,107

)

$

(56,079

)

$

(19,746

)

$

(32,853

)

$

(119,261

)

Canada Drilling

 

(4,608

)

(5,014

)

(592

)

(5,200

)

(9,025

)

International Drilling

 

24,486

 

36,174

 

24,536

 

49,022

 

48,148

 

Drilling Solutions

 

7,546

 

3,772

 

8,721

 

16,267

 

2,794

 

Rig Technologies (1)

 

(3,433

)

(5,040

)

(12,976

)

(16,409

)

(13,171

)

Other reconciling items (4)

 

(41,463

)

(43,107

)

(44,977

)

(86,440

)

(82,711

)

Total adjusted operating income (loss)

 

$

(30,579

)

$

(69,294

)

$

(45,034

)

$

(75,613

)

$

(173,226

)

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Average Rigs Working: (6)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

112.1

 

100.6

 

111.8

 

112.0

 

94.7

 

Canada Drilling

 

10.2

 

12.4

 

21.1

 

15.6

 

17.1

 

International Drilling

 

93.1

 

92.7

 

94.6

 

93.8

 

91.3

 

Total average rigs working

 

215.4

 

205.7

 

227.5

 

221.4

 

203.1

 

 

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(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

 

Six Months Ended

 

 

 

June 30,

 

March 31,

 

June 30,

 

(In thousands)

 

2018

 

2017

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

187,683

 

$

138,796

 

$

168,414

 

$

356,097

 

$

238,536

 

Depreciation and amortization

 

(218,262

)

(208,090

)

(213,448

)

(431,710

)

(411,762

)

Adjusted operating income (loss)

 

(30,579

)

(69,294

)

(45,034

)

(75,613

)

(173,226

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

(1

)

 

2

 

1

 

2

 

Investment income (loss)

 

(3,164

)

(886

)

465

 

(2,699

)

(165

)

Interest expense

 

(60,592

)

(54,688

)

(61,386

)

(121,978

)

(111,206

)

Other, net

 

(77,601

)

(10,104

)

(14,089

)

(91,690

)

(23,614

)

Income (loss) from continuing operations before income taxes

 

$

(171,937

)

$

(134,972

)

$

(120,042

)

$

(291,979

)

$

(308,209

)

 

1-5



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

June 30,

 

March 31,

 

December 31,

 

(In thousands)

 

2018

 

2018

 

2017

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Current portion of debt

 

$

243

 

$

375

 

$

181

 

Long-term debt

 

3,818,613

 

4,256,160

 

4,027,766

 

Total Debt

 

3,818,856

 

4,256,535

 

4,027,947

 

Less: Cash and short-term investments

 

636,546

 

393,587

 

365,366

 

Net Debt

 

$

3,182,310

 

$

3,862,948

 

$

3,662,581

 

 

1-6


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Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

2Q18 Earnings Presentation August 1, 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 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 acquisition of Tesco; 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. 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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3 Recent Company Highlights Increased U.S. Drilling average daily margins to $9,381 from $8,171 in Q1 L48 Margins increased to $7,402 from $6,938, a 7% sequential increase Full quarter of full operating rate for MODS™ 400 Platform Rig (“Big Foot”) During the quarter, we issued equity with net proceeds of $581m Sold three jackups in the Middle East for a total consideration of $82m Generated positive cash flow in Q2 2018 excluding the jackup sale and equity offerings Reduced net-debt by $681m in the quarter (Net-Debt to Cap = 51%) Recent US Rig Awards – six PACE®-F upgrades and three PACE®-M550 upgrades in the Permian; deployments expected now through 1H 2019 Four remaining PACE®-B upgrades expected to deploy in the remainder of 2018 MODS™ 202 platform rig expected to commence work in the Gulf of Mexico in 4Q18 Since the end of 1Q18, we have received awards for 11 international rigs, almost all for 2018 deployment; four rigs commenced in Colombia in 2Q Seven int’l rig additions in 2H18 (Mexico – 2, Colombia – 2, Argentina – 2, Saudi – 1)

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4 Financial Overview

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5 Financial Summary See reconciliations in the Appendix Diluted Earnings (Losses) Per Share from continuing operations ($000 except EPS) 2Q17 3Q17 4Q17 1Q18 2Q18 Operating Revenues $631,355 $662,103 $708,277 $734,194 $761,920 Adjusted EBITDA(1) 138,796 142,870 162,557 168,414 187,683 Adjusted Operating(1) Income (Loss) (69,294) (74,205) (51,549) (45,034) (30,579) GAAP Diluted EPS(2) (0.41) (0.42) (0.40) (0.46) (0.61)

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Debt and Liquidity (As of June 30, 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 June 30, 2018) Cash & Available Capacity: $2,887 High 2Q17 1Q18 2Q18 Change ($MM's) 3/31/12 6/30/17 3/31/18 6/30/18 2Q18 from 1Q18 Total Debt $4,750 $3,740 $4,257 $3,819 ($438) Cash and ST Investments 494 232 394 637 243 Net Debt(1) $4,256 $3,508 $3,863 $3,182 ($681) Shareholders’ Equity 5,811 3,049 2,710 3,063 353 Net Debt to Capitalization(2) 42.3% 53.5% 58.8% 51.0% (7.8%) Coverage(3) 7.8x 2.6x 2.7x 2.8x 0.2x Leverage(4) 2.2x 6.6x 6.3x 4.8x (1.5x)

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7 Business Segments

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Rig Fleet(1) 2Q18 Average Rigs Working Average Utilization U.S. Lower 48 AC > 1500HP 116 94 81% AC Others 72 9 12% SCR Rigs 24 3 11% U.S. Lower 48 Total 212 106 50% U.S. Offshore 14 3 21% Alaska 16 3 21% Canada 43 10 24% International 156 93 60% Subtotal 441 215 48% PACE®-R800 Rig Construction 1 Total Fleet 442 8 2Q18 Rig Utilization & Availability As of June 30th, 2018 Note: Subtotals may not foot due to rounding

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9 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 94 141 67% 7 20 35% 101 161 63% 3 27 11% 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 25 29 86% 0 0 0% 25 29 86% 0 0 0% 25 29 86% 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% 0 8 0% 2 18 11% PACE®-M550 3 30 10% 3 8 38% 6 38 16% 3 18 17% 9 56 16% Other AC Rigs 0 12 0% 0 4 0% 0 16 0% 0 1 0% 0 17 0% Legacy 0 3 0% 2 5 40% 2 8 25% 0 16 0% 2 24 8% Total 94 144 65% 9 25 36% 103 169 61% 3 43 7% 106 212 50% Lower 48 Rig Utilization by Type As of June 30, 2018

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10 116 US 112 Colombia 12 Algeria 3 Italy 1 UAE 0 Saudi Arabia(1) 43 Venezuela 5 Kuwait 3 Ecuador 1 Argentina 15 Oman 4 India 2 Russia 1 Canada 15 Kazakhstan 4 Mexico 2 PNG 0 (1) Includes recently sold offshore jackup rigs Total = 223 Nabors Drilling Operations As of June 30, 2018

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11 Appendix

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12 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. 3Q17 4Q17 1Q18 2Q18 Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working U.S. Drilling $5,296 107.2 $6,444 106.3 $8,171 111.8 $9,381 112.1 Canada Drilling 3,497 13.5 4,650 13.8 5,847 21.1 6,662 10.2 International Drilling 18,233 91.3 17,213 90.7 16,619 94.6 16,349 93.1

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13 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 June 30, September 30, December 31, March 31, June 30, (In Thousands) 2017 2017 2017 2018 2018 Adjusted EBITDA $138,796 $142,870 $162,557 $168,414 $187,683 Depreciation and Amortization (208,090) (217,075) (214,106) (213,448) (218,262) Adjusted Operating Income (loss) (69,294) (74,205) (51,549) (45,034) (30,579) Earnings (losses) from unconsolidated affiliates 0 4 1 2 (1) Investment Income (loss) (886) 373 986 465 (3,164) Interest Expense (54,688) (54,607) (57,076) (61,386) (60,592) Other, net (10,104) (5,559) (30,243) (14,089) (77,601) Income (loss) from continuing operations before income taxes ($134,972) ($133,994) ($137,881) ($120,042) ($171,937)

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14 Reconciliation of Net Debt to Total Debt Net debt is computed by subtracting the sum of cash, cash equivalents, 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 June 30, 2017 March 31, 2018 June 30, 2018 Long-Term Debt $4,474,495 $3,740,248 $4,256,160 $3,818,613 Current Debt 275,616 124 375 243 Total Debt $4,750,111 $3,740,372 $4,256,535 $3,818,856 Cash & Cash Equivalents $354,022 $196,567 $367,039 $593,284 ST Investments 139,950 35,476 26,548 43,262 Net Debt $4,256,139 $3,508,329 $3,862,948 $3,182,310

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