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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 29, 2019

 

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of exchange on which
registered

Common shares

 

NBR

 

NYSE

Preferred shares — Series A

 

NBR.PRA

 

NYSE

 

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 29, 2019, Nabors Industries Ltd. (“Nabors” or the “Company”) issued a press release announcing its results of operations for the quarter ended June 30, 2019.  A copy of that release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

 

On July 30, 2019, Nabors will hold a conference call at 10 a.m. Central Time, regarding the Company’s financial results for the quarter ended June 30, 2019. 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 Securities Exchange Act, of 1934 or otherwise subject to liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933.

 

Item 9.01              Financial Statements and Exhibits.

 

(d)  Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

2


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

NABORS INDUSTRIES LTD.

 

 

 

Date: July 29, 2019

By:

/s/Mark D. Andrews

 

 

Mark D. Andrews

 

 

Corporate Secretary

 

3


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

Nabors Announces Second Quarter 2019 Results

 

 

NEWS RELEASE

 

HAMILTON, Bermuda, July 29, 2019 /PRNewswire/ — Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported second quarter 2019 operating revenue of $771 million, compared to operating revenue of $800 million in the first quarter. Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $208 million, or $0.61 per share, compared to a loss of $122 million, or $0.36 per share, in the prior quarter. Results for the second quarter included net goodwill and intangible asset impairments of $99 million, or $0.29 per share, which were partially offset by a non-recurring tax gain of $31 million, or $0.09 per share.

 

Second-quarter consolidated adjusted EBITDA was $198.4 million, compared to $197.0 million in the previous quarter. Substantial sequential improvements in the Lower 48, Rig Technologies and, to a lesser extent International, more than offset lower seasonal activity in Canada, U.S. Offshore and Alaska. Adjusted operating income for the Company was a loss of $19.9 million in the second quarter, compared to a loss of $13.4 million in the first quarter.

 

Anthony G. Petrello, Nabors Chairman, CEO and President, commented, “For our industry, the quarter was marked by continued gradual softening of drilling activity in the lower 48 and a more positive outlook internationally. We are seeing the same broad market trends and expect they will continue throughout the third quarter. Discussions with our customers indicate a modest temporary reduction in our Lower 48 results, with improvement in our International second-half results.

 

“Contrary to the drop in lower 48 industry rig count, we grew our second quarter rig count by three rigs to nearly 115, as five upgraded rigs were deployed during the quarter.   We also modestly improved daily margins.  Our Canada rig count averaged 7.4 rigs with the seasonal downturn, an 8.9 rig reduction compared to the first quarter.  We also anticipate a third quarter improvement in Canada as seasonal activity recovers.  Our rig count in Canada is expected to approach 15 rigs in the fourth quarter.

 

“Internationally, we have not yet benefitted from the increased rig demand, as our average rig count fell by one. Two of our rigs in Argentina, which were extended for a multiyear term, were temporarily idled due to mandatory recertifications before commencing the new contract term.  We expect our average International rig count to remain flat sequentially, with the potential for a three rig increase late in the third quarter, benefitting the fourth quarter.

 

Mr. Petrello continued, “Our Rig Technologies and Drilling Solutions segments each reported sequential progress. Rig Technologies posted a meaningful improvement with increased aftermarket content, a larger proportion of third-party sales, lower costs and initial revenues in robotics.  Drilling Solutions grew despite the loss of some revenue on third-party rigs, as those rigs shut down. Meanwhile, we continue to see greater penetration of our automation and integration initiatives, as we secured additional jobs for our Navigator™ and ROCKit® Pilot directional drilling automation systems. Today these

 


 

systems are working for seven customers in four basins. Customer adoption is widening and we expect increasing financial contributions in coming quarters.”

 

Consolidated and Segment Results

 

The U.S. Drilling segment reported essentially flat adjusted EBITDA of $125 million.  Improvement in the Lower 48 operation was offset by seasonal declines in activity in Alaska and U.S. Offshore. During the quarter, utilization of the Company’s high-specification rigs in the Lower 48 was approximately 95%. Gross margin increased modestly to $10,220 per day and is expected to increase slightly during the third quarter. This segment’s rig count currently stands at 121, with 112 rigs working in the Lower 48.

 

International Drilling adjusted EBITDA increased sequentially by 1%, to $87 million. Quarterly average rig count declined by one to 89, while the average margin per day was essentially unchanged, at approximately $12,600. During the third quarter, the Company expects adjusted EBITDA to increase by $5 to $7 million, reflecting improved operational performance in various markets and cost reductions.

 

Canada Drilling operations were negatively impacted by the seasonal downturn in addition to the relatively weak current market conditions. Adjusted EBITDA of $1.1 million was down from $7.4 million in the first quarter. The average daily gross margin decreased sequentially to slightly below $3,800.

 

In Drilling Solutions, adjusted EBITDA of $22.5 million was $1.4 million higher than the first quarter, despite a decreased overall industry rig count in the lower 48. Drilling performance software revenue and margins continued to strengthen, with increased market penetration of drilling automation systems.  Results in wellbore placement and PetroMar also improved.

 

In the Rig Technologies segment, second quarter adjusted EBITDA improved to $3.2 million from an adjusted EBITDA loss of $2.3 million in the first quarter. The results reflect higher margins in Canrig, reduced costs related to the commercialization of the rotary steerable tool, and initial revenue and lower costs in robotic drilling systems.

 

Capital Expenditures and Liquidity

 

Capital expenditures for the quarter were higher than expected at $131 million reflecting Lower 48 rig upgrade deployments, which were ahead of schedule, bringing year-to-date capital spending to approximately $275 million. Capital expenditures for the remainder of the year should decline significantly with no additional Lower 48 rig upgrades scheduled and International expenditures for several rig deployments winding down.

 

William Restrepo, Nabors Chief Financial Officer, stated, “Free cash flow after dividends was healthy at $82 million, as compared to $100 million consumed in the first quarter. In the quarter we repurchased $305 million of our 2020 senior notes, which cost us approximately $7 million in premiums, prepayment of accrued interest and transaction fees. Quarterly capital expenditures were $131 million, compared to $146 million in the first quarter. In the third quarter, we are targeting positive free cash flow after dividends, despite semiannual interest payments on our outstanding senior notes. We continue to

 


 

target $400 million in capital spending for the full year and expect to deliver in excess of $200 million in net debt reduction during the full year 2019.”

 

Mr. Petrello concluded, “Despite ongoing volatility in oil prices, and the resultant caution on the part of our U.S. customer base, we continue to believe we will see improving results over the balance of this year.  This view is based on limited downside in the Lower 48, an improving outlook in certain international markets and Drilling Solutions, as well as seasonal recoveries in Canada, Alaska and Offshore.

 

“In the U.S., our strategy of deploying the highest-specification rigs to the industry’s most demanding customers has been successful, as demonstrated by our Lower 48 results. However, we also believe the current market conditions are likely to result in a temporary decrease in utilization in our Lower 48 operations during the third quarter.  Nonetheless, we are encouraged by customer inquiries regarding the availability of our higher-spec rigs to support their drilling plans for early 2020, which we expect to benefit our fourth quarter 2019 results.

 

“On a consolidated basis we expect our adjusted EBITDA to continue improving over the following quarters.”

 

About Nabors

 

Nabors  (NYSE: NBR) owns and operates one of the world’s largest land-based drilling rig fleets and provides 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), impairments and other charges 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, cash equivalents, and short-term investments.  Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities and cash paid for dividends. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base and pay dividends. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. 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), net debt, and free cash flow after dividends, 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.  Reconciliations of consolidated adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes, net debt to total debt, and free cash flow after dividends to cash flow provided by operations , 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, Senior Vice President of Corporate Development & Investor Relations, +1 281-775-8038 or William C. 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 [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)

 

2019

 

2018

 

2019

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

771,406

 

$

761,920

 

$

799,640

 

$

1,571,046

 

$

1,496,114

 

Earnings (losses) from unconsolidated affiliates

 

 

(1

)

(5

)

(5

)

1

 

Investment income (loss)

 

469

 

(3,164

)

9,677

 

10,146

 

(2,699

)

Total revenues and other income

 

771,875

 

758,755

 

809,312

 

1,581,187

 

1,493,416

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

496,664

 

493,975

 

520,957

 

1,017,621

 

969,378

 

General and administrative expenses

 

64,415

 

67,823

 

68,167

 

132,582

 

142,394

 

Research and engineering

 

11,920

 

12,439

 

13,520

 

25,440

 

28,245

 

Depreciation and amortization

 

218,319

 

218,262

 

210,391

 

428,710

 

431,710

 

Interest expense

 

51,491

 

60,592

 

52,352

 

103,843

 

121,978

 

Impairments and other charges

 

102,570

 

69,620

 

(2,667

)

99,903

 

76,664

 

Other, net

 

7,899

 

7,981

 

20,169

 

28,068

 

15,026

 

Total costs and other deductions

 

953,278

 

930,692

 

882,889

 

1,836,167

 

1,785,395

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(181,403

)

(171,937

)

(73,577

)

(254,980

)

(291,979

)

Income tax expense (benefit)

 

11,398

 

23,278

 

29,799

 

41,197

 

46,823

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(192,801

)

(195,215

)

(103,376

)

(296,177

)

(338,802

)

Income (loss) from discontinued operations, net of tax

 

(34

)

(584

)

(157

)

(191

)

(659

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(192,835

)

(195,799

)

(103,533

)

(296,368

)

(339,461

)

Less: Net (income) loss attributable to noncontrolling interest

 

(10,729

)

(2,953

)

(14,176

)

(24,905

)

(3,492

)

Net income (loss) attributable to Nabors

 

$

(203,564

)

$

(198,752

)

$

(117,709

)

$

(321,273

)

$

(342,953

)

Less: Preferred stock dividend

 

$

(4,312

)

$

(3,680

)

$

(4,313

)

$

(8,625

)

$

(3,680

)

Net income (loss) attributable to Nabors common shareholders

 

$

(207,876

)

$

(202,432

)

$

(122,022

)

$

(329,898

)

$

(346,633

)

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to Nabors common shareholders:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(207,842

)

$

(201,848

)

$

(121,865

)

$

(329,707

)

$

(345,974

)

Net income (loss) from discontinued operations

 

(34

)

(584

)

(157

)

(191

)

(659

)

Net income (loss) attributable to Nabors common shareholders

 

$

(207,876

)

$

(202,432

)

$

(122,022

)

$

(329,898

)

$

(346,633

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(0.61

)

$

(0.61

)

$

(0.36

)

$

(0.97

)

$

(1.08

)

Basic from discontinued operations

 

 

 

 

 

 

Total Basic

 

$

(0.61

)

$

(0.61

)

$

(0.36

)

$

(0.97

)

$

(1.08

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(0.61

)

$

(0.61

)

$

(0.36

)

$

(0.97

)

$

(1.08

)

Diluted from discontinued operations

 

 

 

 

 

 

Total Diluted

 

$

(0.61

)

$

(0.61

)

$

(0.36

)

$

(0.97

)

$

(1.08

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

351,543

 

328,372

 

350,764

 

351,154

 

318,580

 

Diluted

 

351,543

 

328,372

 

350,764

 

351,154

 

318,580

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

198,407

 

$

187,683

 

$

196,996

 

$

395,403

 

$

356,097

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss)

 

$

(19,912

)

$

(30,579

)

$

(13,395

)

$

(33,307

)

$

(75,613

)

 

1


 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

 

March 31,

 

December 31,

 

(In thousands)

 

2019

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

395,716

 

$

469,717

 

$

481,802

 

Accounts receivable, net

 

737,353

 

743,528

 

756,320

 

Assets held for sale

 

8,004

 

12,330

 

12,250

 

Other current assets

 

325,606

 

330,328

 

343,191

 

Total current assets

 

1,466,679

 

1,555,903

 

1,593,563

 

Property, plant and equipment, net

 

5,301,252

 

5,399,514

 

5,467,870

 

Goodwill

 

90,645

 

184,104

 

183,914

 

Other long-term assets

 

655,927

 

634,163

 

608,597

 

Total assets

 

$

7,514,503

 

$

7,773,684

 

$

7,853,944

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

 

$

790

 

$

850

 

$

561

 

Other current liabilities

 

771,377

 

734,952

 

831,516

 

Total current liabilities

 

772,167

 

735,802

 

832,077

 

Long-term debt

 

3,550,577

 

3,677,580

 

3,585,884

 

Other long-term liabilities

 

321,576

 

300,340

 

280,796

 

Total liabilities

 

4,644,320

 

4,713,722

 

4,698,757

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest in subsidiary

 

415,042

 

409,923

 

404,861

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

2,381,514

 

2,586,335

 

2,700,850

 

Noncontrolling interest

 

73,627

 

63,704

 

49,476

 

Total equity

 

2,455,141

 

2,650,039

 

2,750,326

 

Total liabilities and equity

 

$

7,514,503

 

$

7,773,684

 

$

7,853,944

 

 

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)

 

2019

 

2018

 

2019

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

323,402

 

$

264,395

 

$

320,209

 

$

643,611

 

$

505,397

 

Canada Drilling

 

11,389

 

17,442

 

25,315

 

36,704

 

49,329

 

International Drilling

 

326,905

 

377,986

 

337,256

 

664,161

 

746,831

 

Drilling Solutions

 

64,583

 

59,859

 

65,422

 

130,005

 

122,507

 

Rig Technologies (1)

 

72,751

 

81,321

 

71,753

 

144,504

 

145,990

 

Other reconciling items (2)

 

(27,624

)

(39,083

)

(20,315

)

(47,939

)

(73,940

)

Total operating revenues

 

$

771,406

 

$

761,920

 

$

799,640

 

$

1,571,046

 

$

1,496,114

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (3)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

124,924

 

$

86,923

 

$

125,005

 

$

249,929

 

$

159,990

 

Canada Drilling

 

1,069

 

4,963

 

7,446

 

8,515

 

14,262

 

International Drilling

 

86,767

 

122,631

 

85,844

 

172,611

 

246,621

 

Drilling Solutions

 

22,461

 

14,765

 

21,046

 

43,507

 

29,493

 

Rig Technologies (1)

 

3,160

 

446

 

(2,296

)

864

 

(8,238

)

Other reconciling items (4)

 

(39,974

)

(42,045

)

(40,049

)

(80,023

)

(86,031

)

Total adjusted EBITDA

 

$

198,407

 

$

187,683

 

$

196,996

 

$

395,403

 

$

356,097

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income (loss): (5)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

$

20,392

 

$

(13,107

)

$

24,683

 

$

45,075

 

$

(32,853

)

Canada Drilling

 

(5,537

)

(4,608

)

(59

)

(5,596

)

(5,200

)

International Drilling

 

(6,884

)

24,486

 

(5,637

)

(12,521

)

49,022

 

Drilling Solutions

 

13,793

 

7,546

 

12,855

 

26,648

 

16,267

 

Rig Technologies (1)

 

496

 

(3,433

)

(5,148

)

(4,652

)

(16,409

)

Other reconciling items (4)

 

(42,172

)

(41,463

)

(40,089

)

(82,261

)

(86,440

)

Total adjusted operating income (loss)

 

$

(19,912

)

$

(30,579

)

$

(13,395

)

$

(33,307

)

$

(75,613

)

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Average Rigs Working: (6)

 

 

 

 

 

 

 

 

 

 

 

U.S. Drilling

 

122.2

 

112.1

 

120.9

 

121.5

 

112.0

 

Canada Drilling

 

7.4

 

10.2

 

16.3

 

11.8

 

15.6

 

International Drilling

 

88.6

 

93.1

 

89.7

 

89.1

 

93.8

 

Total average rigs working

 

218.2

 

215.4

 

226.9

 

222.4

 

221.4

 

 

3


 


(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), impairments and other charges 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), impairments and other charges 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.

 

4


 

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)

 

2019

 

2018

 

2019

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

198,407

 

$

187,683

 

$

196,996

 

$

395,403

 

$

356,097

 

Depreciation and amortization

 

(218,319

)

(218,262

)

(210,391

)

(428,710

)

(431,710

)

Adjusted operating income (loss)

 

(19,912

)

(30,579

)

(13,395

)

(33,307

)

(75,613

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from unconsolidated affiliates

 

 

(1

)

(5

)

(5

)

1

 

Investment income (loss)

 

469

 

(3,164

)

9,677

 

10,146

 

(2,699

)

Interest expense

 

(51,491

)

(60,592

)

(52,352

)

(103,843

)

(121,978

)

Impairments and other charges

 

(102,570

)

(69,620

)

2,667

 

(99,903

)

(76,664

)

Other, net

 

(7,899

)

(7,981

)

(20,169

)

(28,068

)

(15,026

)

Income (loss) from continuing operations before income taxes

 

$

(181,403

)

$

(171,937

)

$

(73,577

)

$

(254,980

)

$

(291,979

)

 

5


 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

 

 

June 30,

 

March 31,

 

December 31,

 

(In thousands)

 

2019

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

Current portion of debt

 

$

790

 

$

850

 

$

561

 

Long-term debt

 

3,550,577

 

3,677,580

 

3,585,884

 

Total Debt

 

3,551,367

 

3,678,430

 

3,586,445

 

Less: Cash and short-term investments

 

395,716

 

469,717

 

481,802

 

Net Debt

 

$

3,155,651

 

$

3,208,713

 

$

3,104,643

 

 

6


 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF FREE CASH FLOW AFTER DIVIDENDS TO

NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

March 31,

 

June 30,

 

(In thousands)

 

2019

 

2019

 

2019

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

203,231

 

$

69,854

 

$

273,085

 

Less: Net cash used for investing activities

 

(113,760

)

(144,444

)

(258,204

)

Less: Dividends to common and preferred shareholders

 

(7,940

)

(25,765

)

(33,705

)

Free cash flow after dividends

 

$

81,531

 

$

(100,355

)

$

(18,824

)

 

Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities and cash paid for dividends. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base and pay dividends. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. 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 the consolidated Company based on several criteria, including free cash flow after dividends, because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance.

 

7


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Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

 

2Q19 Earnings Presentation July 30, 2019 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 and Section 21E of the U.S. Securities Exchange Act of 1934. These “forward-looking statements” are based on our analysis of currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors 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 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; the recent changes in U.S. tax laws and the possibility of changes in other tax laws and other laws and regulation; the possibility of political or economic instability, civil disturbance, war or acts of terrorism in any of the countries in which we do business; the possibility of changes to U.S. trade policies and regulations including the imposition of trade embargoes or sanctions; 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 Sequential L48 margins increased slightly to $10,222 from $10,170 in Q1 Deployed five PACE®-M750 rigs in South and West Texas in 2Q 2019, completing planned L48 upgrades Pending International deployments: Argentina (1), Kazakhstan (1), Kuwait (1), Italy (1), Mexico (2), Russia (1), Saudi Arabia (1) Sequential adjusted EBITDA improvement in Rig Technologies and Drilling Solutions Growing penetration of ROCKit® Pilot and NavigatorTM Successfully tested and commercialized slim borehole version of FracView®

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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) 2Q18 3Q18 4Q18 1Q19 2Q19 Operating Revenues $761,920 $779,425 $782,080 $799,640 $771,406 Adjusted EBITDA(1) 187,683 200,960 201,619 196,996 198,407 Adjusted Operating(1) Income (Loss) (30,579) (7,557) (25,024) (13,395) (19,912) Income (Loss) from Continuing Operations before income taxes (171,937) (83,221) (143,594) (73,577) (181,403) Diluted EPS(2) (0.61) (0.31) (0.55) (0.36) (0.61)

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Debt and Liquidity (As of June 30, 2019) (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 * Available capacity subject to compliance with covenants in credit facilities Liquidity (at June 30, 2019) Cash & Available Capacity: $1,821* High 4Q18 1Q19 2Q19 Change ($MM's) 3/31/12 12/31/18 3/31/19 6/30/19 2Q19 from 1Q19 Total Debt $4,750 $3,586 $3,678 $3,551 ($127) Cash and ST Investments 494 482 470 396 (74) Net Debt(1) $4,256 $3,105 $3,209 $3,156 ($53) Shareholders’ Equity 5,811 2,701 2,586 2,382 (205) Net Debt to Capitalization(2) 42% 53% 55% 57% 2% Coverage(3) 7.8x 3.3x 3.6x 3.8x 0.2x Net Debt to EBITDA(4) 2.2x 4.1x 4.1x 4.0x -0.1x 6

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Debt Maturity Profile as of 6/30/19 All figures in millions Annual figures shown at maturity value. Debt balances reflect carrying values as of June 30, 2019 Availability under Revolving Credit Lines subject to covenants * Value of $294 million as of July 29, 2019 Nearest Maturity in 2020 (1) Debt @ 6/30/19 Total Debt: $3.55Bn(2) Net Debt: $3.16Bn(2) Available Liquidity: $1.82Bn(3) (Revolver Capacity + Cash) (2) (2)(3) * 7

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8 Business Segments

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Rig Fleet(1) 2Q19 Average Rigs Working Average Utilization U.S. Lower 48 AC > 1500HP 119 104 87% AC Others 63 8 13% SCR Rigs 9 2 22% U.S. Lower 48 Total 191 115 60% U.S. Offshore 12 4 33% Alaska 16 4 25% Canada 41 7 17% International 148 89 60% Total Fleet 408 218 54% 9 2Q19 Rig Utilization & Availability As of June 30, 2019 Note: Subtotals may not foot due to rounding

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10 Lower 48 Rig Utilization by Type As of June 30, 2019 Rig Type Total Rigs Active Total Util. AC % PACE®-X* 43 47 91% PACE®-M750 7 7 100% PACE®-M800 6 6 100% PACE®-M1000 4 4 100% PACE®-B 29 29 100% PACE®-S 9 11 82% UPGRADED PACE®-F 6 6 100% PACE®-F 1 9 11% PACE®-M550 7 47 15% Other AC Rigs 0 16 0% SCR 2 9 22% Total 114 191 60% Rig X27 is under repair.

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11 Please refer to the disclaimers on slides 2 and 3 of the presentation deck. U.S. 122 Kazakhstan 5 Venezuela 3 Mexico 2 Saudi Arabia 42 Oman 4 Algeria 2 Colombia 14 Canada 3 India 2 Argentina 9 Russia 3 Kuwait 2 Total = 213 Nabors Drilling Operations As of June 30, 2019

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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. 2Q18 3Q18 4Q18 1Q19 2Q19 Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working Margin(1) Avg. Rigs Working U.S. Drilling $9,381 112.1 $10,540 111.6 $11,428 117.3 $12,350 120.9 $12,061 122.2 Canada Drilling 6,662 10.2 5,352 17.9 6,492 18.3 6,055 16.3 3,764 7.4 International Drilling 16,349 93.1 15,003 96.0 13,527 88.0 12,622 89.7 12,610 88.6

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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), impairments and other charges 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 June 30, September 30, December 31, March 31, June 30, (In Thousands) 2018 2018 2018 2019 2019 Adjusted EBITDA $187,683 $200,960 $201,619 $196,996 $198,407 Depreciation and Amortization (218,262) (208,517) (226,643) (210,391) (218,319) Adjusted Operating Income (loss) (30,579) (7,557) (25,024) (13,395) (19,912) Earnings (losses) from unconsolidated affiliates (1) 0 0 (5) 0 Investment Income (loss) (3,164) (1,342) (5,458) 9,677 469 Interest Expense (60,592) (51,415) (53,731) (52,352) (51,491) Other, net (7,981) (9,137) (5,369) (20,169) (7,899) Impairments and other charges (69,620) (13,770) (54,012) 2,667 (102,570) Income (loss) from continuing operations before income taxes (171,937) (83,221) (143,594) (73,577) (181,403)

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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. March 31, December 31, March 31, June 30, (In Thousands) 2012 2018 2019 2019 Long-Term Debt $4,474,495 $3,585,884 $3,677,580 $3,550,577 Current Debt 275,616 561 850 790 Total Debt $4,750,111 $3,586,445 $3,678,430 $3,551,367 Cash & Cash Equivalents $354,022 $447,766 $429,127 $367,693 ST Investments 139,950 34,036 40,590 28,023 Net Debt $4,256,139 $3,104,643 $3,208,713 $3,155,651

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