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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) October 30, 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 October 30, 2018, Nabors Industries Ltd. (“Nabors” or the “Company”) issued a press release announcing its results of operations for the three-month period ended September 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 operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss) and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. 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 October 31, 2018, Nabors will hold a conference call at 10:00 a.m. central time, regarding the Company’s financial results for the quarter ended September 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 October 31, 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 in Item 2.02 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: October 30, 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 Third Quarter Results

 

HAMILTON, Bermuda, October 30, 2018 /PRNewswire/ — Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported third quarter 2018 operating revenues of $779 million, compared to operating revenues of $762 million in the second quarter, a 2% increase.  Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $105 million, or $0.31 per share, compared to a loss of $202 million, or $0.61 per share, in the prior quarter. Results for the third quarter included a loss of $10 million, or $0.02 per share in premiums paid to redeem the Company’s 9.25% notes due early next year.   The second quarter included charges of $69.6 million or $0.22 per share principally from the sale of three Middle East jackups, and other minor transaction charges.

 

Anthony Petrello, Nabors Chairman, CEO and President, commented, “The U.S. Drilling segment was the highlight of the third quarter, primarily attributable to the strong performance of the Lower 48 drilling operation. Average daily rig margins in that operation exceeded $8,700 — a $1,300 per day sequential increase — due to the combination of increasing rates and a decline in operating costs. In our other drilling segments, results improved seasonally in Canada, but declined in the International segment due primarily to the divestiture of our jackups and higher operational and reactivation expenses.

 

“During the quarter, we redeemed the $303 million outstanding of our 9.25% notes, which were due in early 2019. Our next debt maturity is not until late 2020. After the quarter ended, we amended our existing revolving credit facility, and added a new $1.27 billion revolving five-year facility providing us with good long-term liquidity.

 

“We also signed contracts for nine incremental rigs globally and received another four awards in the U.S. Lower 48.  Four of the signed contracts are for upgraded rigs for multiple operators in the U.S., deploying by the end of 2018. The four new awards are for M750 upgrades and will deploy in the first half of 2019.  The other five contracts are for incremental rigs in our International operations where we are also negotiating with customers for additional rigs.  Demand for high-performance rigs is increasing across most of our global operations. We are encouraged by the positive reception of our rig upgrade configuration and the number of prospects for additional upgraded rigs with multiple operators, particularly in the Lower 48.  We believe we are well positioned to secure a disproportionate share of future awards.

 

“Effective September 1, 2018, SANAD, our joint venture with Saudi Aramco, contracted 25 existing rigs with Aramco for four-year terms at improved rates.  The renewal of the rigs will lead to a considerable increase in free cash flow. Twenty of these rigs are being leased from Nabors, while the other five represent the second tranche of Nabors rigs contributed to SANAD”.

 

Consolidated and Segment Results

 

Adjusted operating income for the Company was a loss of $8 million during the quarter, compared to a loss of $31 million in the second quarter.  Third quarter consolidated adjusted EBITDA increased to $201 million compared to $188 million in the previous quarter, a 7% increase.  During the third quarter, the Company averaged 226 rigs operating at an average gross margin of

 


 

$12,028 per rig day.  This compares to 215 rigs at $12,262 per rig day in the second quarter.  The increase in rig count primarily reflects the usual seasonal improvement in activity in Canada as well as three additional rigs in the International segment.

 

The U.S. Drilling segment reported a 14% sequential increase in adjusted EBITDA, to $99 million.  All of the increase is attributable to the Lower 48 operation.  A sequential increment of $1,300 in average daily gross margin reflected both higher dayrates and lower costs.   Although the rig count was only up fractionally, it should increase meaningfully in the near future as multiple upgraded rigs commence operations.

 

International Drilling adjusted EBITDA decreased sequentially by $5.8 million, to $117 million.  The quarterly rig count increased by three to 96.  Additional operating rigs in Latin America and Russia more than offset the impact on the rig count from the sale of three jackup rigs in the Middle East in early June.  The average margin per day decreased from approximately $16,350 to $15,000 due to the loss of contribution from some higher margin land rigs and the jackup sale, as well as incremental costs in Saudi Arabia and Mexico

 

Canada Drilling operations posted a seasonal increase with adjusted EBITDA of $7.3 million, up from $5.0 million in the second quarter.  Daily gross margin declined to $5,352 due primarily to the addition of lower-specification rigs as activity increased.

 

In Drilling Solutions, adjusted EBITDA of $16.1 million represents an increase of 9% from $14.8 million in the prior quarter.  The improved results were spread across the Tubular Services and Performance Software service lines.   During the quarter, this operation continued to make good progress on its post-acquisition Tesco integration. The Company expects all Drilling Solutions lines to contribute towards continued strong growth in the fourth quarter.  Nonetheless, given operational challenges in wellbore placement, Nabors now expects Drilling Solutions to close the year by generating adjusted EBITDA in the low $20 million range during the fourth quarter.

 

In the Rig Technologies segment, third-quarter adjusted EBITDA of $0.1 million was essentially flat with the second quarter, despite a significant decline in revenue. The segment benefited from a favorable revenue mix. Costs also improved due to ongoing capture of Tesco synergies.

 

Capital Expenditures and Liquidity

 

During the quarter, the Company restructured its credit facilities to provide it with a $1.27 billion new revolving credit facility expiring in October 2023, while the existing revolver, which expires in July 2020, was amended to reduce commitments to $666 million. The new five-year facility incorporates enhanced credit protection for lenders including subsidiary guarantees and an additional covenant. The original facility is essentially unchanged except for the reduced amount.

 

Net debt increased by $167 million in the third quarter. This deficit was expected to be offset by a net payment from Saudi Aramco of $157 million in late September, which was not received until October 4, 2018.  The net payment related to the contribution in the third quarter of five rigs to SANAD from Nabors and one from Aramco.  The increase in net debt also resulted in part from semiannual interest payments on the debt and the premium incurred with the redemption of the 2019 notes in July.  In addition, the Company consumed some $60 million more than anticipated in working capital due mainly to a reduction in previously accrued payables largely consisting of incremental payments that are not expected to recur in the fourth quarter.

 

Capital expenditures for the third quarter totaled $120 million. The Company anticipates total capital expenditures for 2018 to be approximately $500 million, which implies fourth quarter

 


 

expenditures of $170 million. The majority of this capex is expected to occur late in the quarter with actual payments slipping into 2019.

 

William Restrepo, Nabors Chief Financial Officer, stated, “Our recently restructured credit facilities, following our equity issue in the second quarter, provide us with significant liquidity over the next five years, in an amount more in accordance with our potential requirements. At the beginning of the quarter, we redeemed the remaining $303 million of our 9.25% senior notes outstanding.  We now have no additional senior notes maturing until September 2020.  For the balance of 2018, we expect that operating results, limited interest expenses, low capex payments and the Aramco cash inflow should help us meet our target of stable net debt for the year, excluding the impact of our equity issuance last May.”

 

Mr. Petrello concluded, “As illustrated by its results, our U.S. Drilling business is unlocking the value held in its operations. We are optimistic that demand in this market will continue to strengthen, providing opportunities to employ additional upgraded assets.  Beyond the U.S., momentum is beginning to pick up, as shown by our rig deployments. We expect utilization of our global fleet to increase significantly over the next several quarters.   We continue to make steady progress on our initiatives to integrate selected services and implement rig automation.  This should drive continued growth in our Drilling Solutions and Rig Technologies segments.”

 

About Nabors

 

Nabors  (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 operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss) and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and

 


 

amortization expenses. 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. 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, 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

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands, except per share amounts)

 

2018

 

2017

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

779,425

 

$

662,103

 

$

761,920

 

$

2,275,539

 

$

1,856,008

 

Earnings (losses) from unconsolidated affiliates

 

 

4

 

(1

)

1

 

6

 

Investment income (loss)

 

(1,342

)

373

 

(3,164

)

(4,041

)

208

 

Total revenues and other income

 

778,083

 

662,480

 

758,755

 

2,271,499

 

1,856,222

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

497,194

 

441,263

 

493,975

 

1,466,572

 

1,246,428

 

General and administrative expenses

 

66,813

 

65,010

 

67,823

 

209,207

 

192,114

 

Research and engineering

 

14,458

 

12,960

 

12,439

 

42,703

 

36,060

 

Depreciation and amortization

 

208,517

 

217,075

 

218,262

 

640,227

 

628,837

 

Interest expense

 

51,415

 

54,607

 

60,592

 

173,393

 

165,813

 

Other, net

 

22,907

 

5,559

 

77,601

 

114,597

 

29,173

 

Total costs and other deductions

 

861,304

 

796,474

 

930,692

 

2,646,699

 

2,298,425

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(83,221

)

(133,994

)

(171,937

)

(375,200

)

(442,203

)

Income tax expense (benefit)

 

10,489

 

(14,709

)

23,278

 

57,312

 

(59,814

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(93,710

)

(119,285

)

(195,215

)

(432,512

)

(382,389

)

Income (loss) from discontinued operations, net of tax

 

(13,933

)

(27,134

)

(584

)

(14,592

)

(43,077

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(107,643

)

(146,419

)

(195,799

)

(447,104

)

(425,466

)

Less: Net (income) loss attributable to noncontrolling interest

 

(6,934

)

(2,113

)

(2,953

)

(10,426

)

(5,001

)

Net income (loss) attributable to Nabors

 

$

(114,577

)

$

(148,532

)

$

(198,752

)

$

(457,530

)

$

(430,467

)

Less: Preferred stock dividend

 

$

(4,313

)

$

 

$

(3,680

)

$

(7,993

)

$

 

Net income (loss) attributable to Nabors common shareholders

 

$

(118,890

)

$

(148,532

)

$

(202,432

)

$

(465,523

)

$

(430,467

)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Nabors common shareholders:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(104,957

)

$

(121,398

)

$

(201,848

)

$

(450,931

)

$

(387,390

)

Net income (loss) from discontinued operations

 

(13,933

)

(27,134

)

(584

)

(14,592

)

(43,077

)

Net income (loss) attributable to Nabors common shareholders

 

$

(118,890

)

$

(148,532

)

$

(202,432

)

$

(465,523

)

$

(430,467

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(0.31

)

$

(0.42

)

$

(0.61

)

$

(1.39

)

$

(1.35

)

Basic from discontinued operations

 

(0.04

)

(0.10

)

 

(0.05

)

(0.16

)

Total Basic

 

$

(0.35

)

$

(0.52

)

$

(0.61

)

$

(1.44

)

$

(1.51

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(0.31

)

$

(0.42

)

$

(0.61

)

$

(1.39

)

$

(1.35

)

Diluted from discontinued operations

 

(0.04

)

(0.10

)

 

(0.05

)

(0.16

)

Total Diluted

 

$

(0.35

)

$

(0.52

)

$

(0.61

)

$

(1.44

)

$

(1.51

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

350,194

 

279,313

 

328,372

 

329,118

 

278,670

 

Diluted

 

350,194

 

279,313

 

328,372

 

329,118

 

278,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

200,960

 

$

142,870

 

$

187,683

 

$

557,057

 

$

381,406

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss)

 

$

(7,557

)

$

(74,205

)

$

(30,579

)

$

(83,170

)

$

(247,431

)

 

1-1


 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

June 30,

 

December 31,

 

(In thousands)

 

2018

 

2018

 

2017

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

388,558

 

$

636,546

 

$

365,366

 

Accounts receivable, net

 

775,137

 

780,247

 

698,477

 

Assets held for sale

 

20,289

 

35,963

 

37,052

 

Other current assets

 

355,056

 

329,715

 

346,441

 

Total current assets

 

1,539,040

 

1,782,471

 

1,447,336

 

Property, plant and equipment, net

 

5,608,948

 

5,709,895

 

6,109,565

 

Goodwill

 

172,976

 

172,817

 

173,226

 

Other long-term assets

 

639,583

 

635,105

 

671,857

 

Total assets

 

$

7,960,547

 

$

8,300,288

 

$

8,401,984

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

 

$

433

 

$

243

 

$

181

 

Other current liabilities

 

751,959

 

873,539

 

919,295

 

Total current liabilities

 

752,392

 

873,782

 

919,476

 

Long-term debt

 

3,737,273

 

3,818,613

 

4,027,766

 

Other long-term liabilities

 

296,389

 

310,726

 

311,971

 

Total liabilities

 

4,786,054

 

5,003,121

 

5,259,213

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest in subsidiary

 

210,665

 

208,519

 

203,998

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

2,931,222

 

3,063,034

 

2,911,816

 

Noncontrolling interest

 

32,606

 

25,614

 

26,957

 

Total equity

 

2,963,828

 

3,088,648

 

2,938,773

 

Total liabilities and equity

 

$

7,960,547

 

$

8,300,288

 

$

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

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands, except rig activity)

 

2018

 

2017

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

273,996

 

$

222,747

 

$

264,395

 

$

779,393

 

$

572,025

 

Canada Drilling

 

26,645

 

18,073

 

17,442

 

75,974

 

63,002

 

International Drilling

 

377,125

 

374,106

 

377,986

 

1,123,956

 

1,092,667

 

Drilling Solutions

 

60,923

 

37,506

 

59,859

 

183,430

 

96,700

 

Rig Technologies (1)

 

63,641

 

50,032

 

81,321

 

209,631

 

155,293

 

Other reconciling items (2)

 

(22,905

)

(40,361

)

(39,083

)

(96,845

)

(123,679

)

Total operating revenues

 

$

779,425

 

$

662,103

 

$

761,920

 

$

2,275,539

 

$

1,856,008

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

99,353

 

$

43,256

 

$

86,923

 

$

259,343

 

$

107,676

 

Canada Drilling

 

7,294

 

2,570

 

4,963

 

21,556

 

13,082

 

International Drilling

 

116,797

 

136,839

 

122,631

 

363,418

 

380,279

 

Drilling Solutions

 

16,145

 

9,761

 

14,765

 

45,638

 

20,330

 

Rig Technologies (1)

 

137

 

(7,938

)

446

 

(8,101

)

(15,142

)

Other reconciling items (4)

 

(38,766

)

(41,618

)

(42,045

)

(124,797

)

(124,819

)

Total adjusted EBITDA

 

$

200,960

 

$

142,870

 

$

187,683

 

$

557,057

 

$

381,406

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

2,578

 

$

(53,536

)

$

(13,107

)

$

(30,275

)

$

(172,797

)

Canada Drilling

 

(1,895

)

(7,494

)

(4,608

)

(7,095

)

(16,519

)

International Drilling

 

25,680

 

32,316

 

24,486

 

74,702

 

80,464

 

Drilling Solutions

 

9,506

 

5,864

 

7,546

 

25,773

 

8,658

 

Rig Technologies (1)

 

(4,141

)

(10,535

)

(3,433

)

(20,550

)

(23,706

)

Other reconciling items (4)

 

(39,285

)

(40,820

)

(41,463

)

(125,725

)

(123,531

)

Total adjusted operating income (loss)

 

$

(7,557

)

$

(74,205

)

$

(30,579

)

$

(83,170

)

$

(247,431

)

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Average Rigs Working: (6)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

111.6

 

107.2

 

112.1

 

111.8

 

98.9

 

Canada Drilling

 

17.9

 

13.5

 

10.2

 

16.4

 

15.9

 

International Drilling

 

96.0

 

91.3

 

93.1

 

94.6

 

91.3

 

Total average rigs working

 

225.5

 

212.0

 

215.4

 

222.8

 

206.1

 

 

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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 represents income (loss) from continuing operations before income taxes, interest expense, depreciation and amortization, earnings (losses) from unconsolidated affiliates, investment income (loss) and other, net. 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) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss) and other, net. 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

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands)

 

2018

 

2017

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

200,960

 

$

142,870

 

$

187,683

 

$

557,057

 

$

381,406

 

Depreciation and amortization

 

(208,517

)

(217,075

)

(218,262

)

(640,227

)

(628,837

)

Adjusted operating income (loss)

 

(7,557

)

(74,205

)

(30,579

)

(83,170

)

(247,431

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

 

4

 

(1

)

1

 

6

 

Investment income (loss)

 

(1,342

)

373

 

(3,164

)

(4,041

)

208

 

Interest expense

 

(51,415

)

(54,607

)

(60,592

)

(173,393

)

(165,813

)

Other, net

 

(22,907

)

(5,559

)

(77,601

)

(114,597

)

(29,173

)

Income (loss) from continuing operations before income taxes

 

$

(83,221

)

$

(133,994

)

$

(171,937

)

$

(375,200

)

$

(442,203

)

 

1-5


 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

September 30,

 

June 30,

 

December 31,

 

(In thousands)

 

2018

 

2018

 

2017

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Current portion of debt

 

$

433

 

$

243

 

$

181

 

Long-term debt

 

3,737,273

 

3,818,613

 

4,027,766

 

Total Debt

 

3,737,706

 

3,818,856

 

4,027,947

 

Less: Cash and short-term investments

 

388,558

 

636,546

 

365,366

 

Net Debt

 

$

3,349,148

 

$

3,182,310

 

$

3,662,581

 

 

1-6


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Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

3Q18 Earnings Presentation October 30, 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 facilities, 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 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; 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 $10,540 from $9,381 in Q2 L48 Margins increased to $8,732 from $7,402, an 18% sequential increase Recent U.S. Rig Awards Four PACE®-M550 upgrades in the Permian and Eagle Ford Deployments expected through 1Q 2019 Three PACE®-B upgrades signed and deployed in 3Q18 One remaining PACE®-B upgrade scheduled to deploy in 4Q18 MODS™ 202 platform rig expected to commence work in the U.S. GoM in 4Q18 Since the end of 2Q18, signed contracts for 5 incremental International rigs Algeria, Colombia, Kazakhstan, and Russia

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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) 3Q17 4Q17 1Q18 2Q18 3Q18 Operating Revenues $662,103 $708,277 $734,194 $761,920 $779,425 Adjusted EBITDA(1) 142,870 162,557 168,414 187,683 200,960 Adjusted Operating(1) Income (Loss) (74,205) (51,549) (45,034) (30,579) (7,557) GAAP Diluted EPS(2) (0.42) (0.40) (0.46) (0.61) (0.31)

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Debt and Liquidity (As of September 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 September 30, 2018) Cash & Available Capacity: $2,424 High 3Q17 2Q18 3Q18 Change ($MM's) 3/31/12 9/30/17 6/30/18 9/30/18 3Q18 from 2Q18 Total Debt $4,750 $3,959 $3,819 $3,738 ($81) Cash and ST Investments 494 220 637 389 (248) Net Debt(1) $4,256 $3,738 $3,182 $3,349 $167 Shareholders’ Equity 5,811 2,901 3,063 2,931 (132) Net Debt to Capitalization(2) 42% 56% 51% 53% 2.3% Coverage(3) 7.8x 2.5x 2.8x 3.1x 0.3x Leverage(4) 2.2x 7.1x 4.8x 4.7x (0.1x)

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Debt Maturity Profile (As of September 30, 2018) Debt balances reflect carrying value as of 30-Sept-2018 See Appendix for reconciliation Nearest Maturity now in 2020 with 01/2019 $303m Maturity Redeemed Balance Sheet Total Debt: $3.7Bn(1) Net Debt(2): $3.3Bn(1) Available Liquidity: $2.4Bn Available Liquidity (Revolver Capacity + Cash) Bonds, Notes & Other Revolving Credit Facility Cash Total Liquidity: 2,209 215 670 695 600 347 445 800 2035 389 0 500 1000 1500 2000 2500 3000 2018 2019 2020 2021 2022 1H23 2H23 2024 2025 2026

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8 Business Segments

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Rig Fleet(1) 3Q18 Average Rigs Working Average Utilization U.S. Lower 48 AC > 1500HP 113 95 84% AC Others 72 9 13% SCR Rigs 24 2 8% U.S. Lower 48 Total 209 106 51% U.S. Offshore 12 3 25% Alaska 16 2 14% Canada 43 18 42% International 153 96 63% Total Fleet 433 225 52% 9 3Q18 Rig Utilization & Availability As of September 30th, 2018 Note: Subtotals may not foot due to rounding

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10 Lower 48 Rig Utilization by Type As of September 30, 2018 Pad Not Pad Total Capable Capable Rigs Active Total Total Active Total Util. Active Total Util. AC 102 158 65% 3 27 11% 105 185 57% PACE®-X 45 47 96% 0 0 0% 45 47 96% PACE®-M800 6 6 100% 0 0 0% 6 6 100% PACE®-M1000 4 4 100% 0 0 0% 4 4 100% PACE®-B 26 29 90% 0 0 0% 26 29 90% PACE®-S 11 11 100% 0 0 0% 11 11 100% PACE®-F 4 8 50% 0 8 0% 4 16 25% PACE®-M550 6 36 17% 3 18 17% 9 54 16% Other AC Rigs 0 17 0% 0 1 0% 0 18 0% Legacy 2 8 25% 0 16 0% 2 24 8% Total 104 166 62% 3 43 7% 107 209 51%

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11 116 US 112 Colombia 12 Algeria 3 Mexico 2 UAE 0 Saudi Arabia 41 Kazakhstan 5 Russia 3 Ecuador 1 Canada 18 Venezuela 5 India 2 Italy 1 Argentina(1) 16 Oman 4 Kuwait 2 PNG 0 (1) Includes recently sold workover rigs Total = 223 Nabors Drilling Operations As of September 30, 2018

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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. 4Q17 1Q18 2Q18 3Q18 Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working U.S. Drilling $6,444 106.3 $8,171 111.8 $9,381 112.1 $10,540 111.6 Canada Drilling 4,650 13.8 5,847 21.1 6,662 10.2 5,352 17.9 International Drilling 17,213 90.7 16,619 94.6 16,349 93.1 15,003 96.0

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14 Reconciliation of Adjusted EBITDA to Income (Loss) from Cont. Operations Before Income Taxes Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. 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 September 30, December 31, March 31, June 30, September 30, (In Thousands) 2017 2017 2018 2018 2018 Adjusted EBITDA $142,870 $162,557 $168,414 $187,683 $200,960 Depreciation and Amortization 217,075 214,106 213,448 218,262 208,517 Adjusted Operating Income (loss) (74,205) (51,549) (45,034) (30,579) (7,557) Earnings (losses) from unconsolidated affiliates 4 1 2 (1) 0 Investment Income (loss) 373 986 465 (3,164) (1,342) Interest Expense (54,607) (57,076) (61,386) (60,592) (51,415) Other, net (5,559) (30,243) (14,089) (77,601) (22,907) Income (loss) from continuing operations before income taxes ($133,994) ($137,881) ($120,042) ($171,937) ($83,221)

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15 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 September 30, 2017 June 30, 2018 September 30, 2018 Long-Term Debt $4,474,495 $3,958,615 $3,818,613 $3,737,273 Current Debt 275,616 196 243 433 Total Debt $4,750,111 $3,958,811 $3,818,856 $3,737,706 Cash & Cash Equivalents $354,022 $190,556 $593,284 $347,525 ST Investments 139,950 29,770 43,262 41,033 Net Debt $4,256,139 $3,738,485 $3,182,310 $3,349,148

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