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Section 1: 8-K (FORM 8-K)

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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): Tuesday, November 3, 2020

 

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:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨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 ¨

 

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. ¨

 

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition.

 

On November 3, 2020, Nabors Industries Ltd. (“Nabors”) issued a press release announcing its results of operations for the three months ended September 30, 2020. A copy of that release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

 

On November 4, 2020, Nabors will hold a conference call at 1:00 p.m. Central Time, regarding the Company’s financial results for the quarter ended September 30, 2020. 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 9.01Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.   Description
     
99.1   Press Release
99.2   Investor Information
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 

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: November 3, 2020 By: /s/ Mark D. Andrews
    Mark D. Andrews
    Corporate Secretary

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

  NEWS RELEASE

 

Nabors Announces Third Quarter 2020 Results

 

HAMILTON, Bermuda, November 3, 2020 /PRNewswire/ -- Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported third quarter 2020 operating revenues of $438 million, compared to operating revenues of $534 million in the second quarter of 2020. The net loss from continuing operations attributable to Nabors common shareholders for the quarter was $161 million, or $23.42 per share, compared to a loss of $152 million, or $22.13 per share in the prior quarter. After-tax charges in the third quarter totaled $4 million, or $0.61 per share, primarily related to severance costs. In the second quarter, after-tax charges totaled $54 million, or $7.68 per share, mainly from asset impairments and severance costs.

 

For the third quarter, adjusted EBITDA was $114 million, compared to $154 million in the prior quarter. Nabors’ global drilling rig count declined by 11%, driven by a 16% reduction in its Lower 48 rig count, while the quarterly average rig count for this market fell by 37%. International rigs decreased by 11, or 13%. The majority of Nabors global rig decline resulted from temporary suspensions of rigs in Saudi Arabia, as well as contract cancellations in Kazakhstan, Colombia and Algeria. Several rigs in international markets continued on reduced or standby rates due to COVID restrictions. The third quarter benefited from a positive revenue adjustment of approximately $6 million, related to favorable outcomes in pricing negotiations across our International Drilling segment. Second quarter results benefited from one-time net gains of approximately $8 million, primarily reflecting revenue from early terminations on international drilling contracts.

 

Anthony G. Petrello, Nabors Chairman, CEO and President, commented, “Our third quarter results were somewhat better than we expected. We executed well across the enterprise. Even as activity deteriorated as anticipated, margins were better than we projected in the Lower 48 and International rig markets. The spending reductions we implemented earlier this year supported our free cash flow generation and a modest improvement in net debt.

 

“The third quarter appears to mark an inflection point in the Lower 48 industry rig market, which has risen some 52 rigs, or 23%, from the level in mid-August. This momentum bolstered our own rig count through the quarter, and supported daily rig margins in the face of challenging industry utilization. Based on quarterly average working rig counts, we increased our Lower 48 market share by approximately three points sequentially, and in the third quarter held approximately a 15% share. In a difficult environment, this gain demonstrates growing client preference for our value proposition.

 

“We expect activity in the Lower 48 to continue improving. As we place rigs back to work, pricing on these rigs should be meaningfully below our Lower 48 fleet average. We have mitigated pricing erosion with significant reductions to our direct costs. Nonetheless, the full impact of current market pricing on our margins still lies ahead.

 

“In our International Drilling segment, rig count declined by 11 rigs. This change primarily reflects reduced activity in the Eastern Hemisphere in reaction to weak market fundamentals. Temporary suspensions accounted for most of the quarter’s reduction in rig count. We expect our suspended rigs to resume operations beginning in early 2021. In addition to this reduction in activity, our revenue continues to be affected materially by lower negotiated and standby rates reflecting COVID restrictions in a few markets.

 

 

 

 

  NEWS RELEASE

 

“Activity trends in our international markets are mixed. We continue to see a gradual recovery in the Latin America markets. During the third quarter, we drilled a record well for an operator in Argentina. As a direct result of this performance, we have been awarded additional content from our Drilling Solutions portfolio on future wells, displacing incumbent competitors in the process.

 

“In the Eastern Hemisphere, we have experienced further activity suspensions in the fourth quarter. Although we expect our International rig count to decline during the remainder of the year, we anticipate it to stabilize by year end and gradually improve throughout 2021.

 

“The resurgence of COVID, and the recent volatility in oil prices, may temper this improvement in the market. Those factors notwithstanding, we remain focused on cost and capital discipline in order to generate free cash flow and reduce net debt.”

 

Consolidated and Segment Results

 

The U.S. Drilling segment reported $60.5 million in adjusted EBITDA for the third quarter of 2020, a $17.1 million, or 22%, reduction from the prior quarter. During the quarter, Nabors’ Lower 48 rig count, at 48, decreased by 9 rigs, or 16%. Average daily margins in the Lower 48 narrowed by $922, to $9,527, driven by a reduction in pricing of approximately $1,500 per day. The Company reduced daily operating costs by about $600 per day to help mitigate the weaker dayrates. The U.S. segment’s rig count currently stands at 58, with 53 rigs on rate in the Lower 48. Nabors’ rig count troughed at 45 rigs and has since recovered on increased market demand. Based on the Company’s current outlook, the fourth quarter average Lower 48 rig count is expected to increase by two to four rigs over the third quarter average. Fourth quarter drilling margins are expected to range between $8,500 and $9,000, reflecting additional pricing erosion. In the fourth quarter, the Company expects the U.S. Offshore and Alaska markets to experience stable activity and adjusted EBITDA in line with the third quarter.

 

International Drilling adjusted EBITDA declined sequentially from the prior quarter by $21.6 million, to $71.9 million. The third quarter benefited from retroactive pricing adjustments in several markets and by exceptional operating performance in Saudi Arabia. This was more than offset by the absence of the prior quarter’s one-time gains related to early terminations, coupled with activity reductions across markets. The International rig count averaged 71 rigs, a 13% decline from the prior quarter. Average margin per day was $12,678, a decline of $1,413, driven by a less favorable mix and the significant drop in rig count on relatively stable field support costs.

 

The Company’s fourth quarter outlook includes an additional four rig decline in the Eastern Hemisphere, two of which are temporary suspensions. Sequentially, Nabors expects its margins in the fourth quarter to be impacted by the absence of the third quarter retroactive revenue adjustment, and by additional costs in Saudi Arabia, related to ramping up of the SANAD rig count in preparation for resumption of activity at the beginning of next year. The Company’s revenue in Mexico also will be affected by a lengthy rig move between platforms during the quarter.

 

 

 

 

  NEWS RELEASE

 

Canada Drilling reported adjusted EBITDA of $2.2 million, as rig activity increased from the seasonal low in the second quarter. Average daily gross margin increased significantly as the average working rig count improved, resulting in materially better cost absorption. The third quarter rig count totaled 7.4 rigs, up by 5.2 rigs from the prior quarter. For the fourth quarter of 2020, the Company expects rig activity at least equal to the third quarter.

 

In Drilling Solutions, adjusted EBITDA of $7.1 million declined by $2.3 million, or 24%, compared to the second quarter, due to reduced activity across service lines together with continued price erosion. The segment’s activity level is closely linked to the total Lower 48 rig count with significant activity lost both on Nabors and third-party rigs.

 

In the Rig Technologies segment, third quarter adjusted EBITDA was $1.3 million, down from the prior quarter adjusted EBITDA of $3.2 million. Lower capital equipment sales were the largest driver of the decline in segment results. The Company expects fourth quarter adjusted EBITDA for Drilling Solutions and Rig Technologies to remain roughly in line with the third quarter results.

 

Free Cash Flow and Capital Discipline

 

Capital expenditures were $39 million in the third quarter, and totaled $149 million for the first nine months of 2020. The Company expects capital expenditures of approximately $200 million for the full year.

 

Free cash flow, defined as net cash provided by operating activities less net cash used by investing activities, as presented in our cash flow statement, reached $9 million in the third quarter. These results include the impact of approximately $80 million in semiannual interest payments on senior notes during the third quarter. In September, the Company redeemed $139 million of its 5.00% notes at maturity. Total debt increased by $14 million during the third quarter and net debt, defined as total debt less cash, cash equivalents and short-term investments, declined by $6 million. Cash, cash equivalents and short-term investments closed at $514 million, a $20 million increase over the prior quarter. Subsequent to the end of the third quarter, the Company’s indirect wholly owned subsidiary, Nabors Industries, Inc., completed a private transaction in which $115 million in principal amount of its 0.75% Senior Exchangeable Notes due 2024 were exchanged for approximately $50.5 million of new 6.5% Senior Priority Guaranteed Notes due 2025.

 

William Restrepo, Nabors CFO, stated, “The third quarter environment continued to test the strength of our Company. Despite the challenges we face, there were many encouraging signs. Our team in the U.S. continued to deliver robust daily margins for the Lower 48 market and superior HSE performance, while maintaining our relative market share performance. We managed to conclude negotiations with several clients. This will allow us to resume collections of our receivables with these customers. Our activity overall has held up better than we thought, which resulted in strong adjusted EBITDA for the quarter. As promised, we once again delivered positive free cash flow, despite some deterioration in our DSOs and the semiannual interest payments on our notes. As a reminder, interest payments on our notes occur in the first and third quarters.

 

 

 

 

  NEWS RELEASE

 

“We reduced overhead costs beginning in the second quarter. We made further progress in the third quarter. G&A, R&E and field support expenses totaled $85.4 million, an improvement versus $89.1 million in the second quarter. We expect those costs to remain at a similar level in the fourth quarter. Our cost and capital discipline has helped us absorb the difficult market trends.

 

“Although Lower 48 activity appears to have troughed, pricing remains weak. The International rig count continues to decline and our smaller segments are not pulling their weight. We expect our adjusted EBITDA to decrease materially in the fourth quarter and consequently will continue to focus on our costs and capital expenditures. Despite lower adjusted EBITDA, we anticipate free cash flow for the fourth quarter of approximately $90 million to $100 million. As we have done these past years, we will continue to use our free cash flow to reduce our debt levels.”

 

Mr. Petrello concluded, “While we remain focused on our financial goals, we are positioning the Company for the next upturn.

 

“Digitalization, analytics and automation will be the enabling technologies in the future. These transformations are already underway, and Nabors continues to drive these innovations.

 

“Our recently introduced RigCLOUD® digital platform, which is already gaining momentum with multiple major clients, is the central element of our comprehensive digital strategy. Our near-term objective for this leading-edge technology is to expand its penetration into the full range of clients. Further development of this technology and additional scale will be keys to our success.

 

“I would again like to thank our employees for their efforts and sacrifices in this trying environment. We owe our success to the hard work and dedication of the industry’s best and safest workforce.”

 

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 several international markets. Nabors also provides directional drilling services, tubular services, performance software, and innovative technologies for its own rig fleet and those of third parties. Leveraging advanced drilling automation capabilities, Nabors highly skilled workforce continues to set new standards for operational excellence and transform the 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. 

 

 

 

 

  NEWS RELEASE

 

Non-GAAP Disclaimer

 

This press release may present 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 represents net cash provided by operating activities less cash used for investing activities. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base. 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, 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 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:  William C. Conroy, Vice President of Corporate Development & Investor Relations, +1 281-775-2423, or Kara Peak, Director of Corporate Development & Investor Relations, +1 281-775-4954.   To request investor materials, contact Nabors' corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail mark.andrews@nabors.com

 

 

 

 

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)  2020   2019   2020   2020   2019 
Revenues and other income:                         
Operating revenues  $438,352   $758,076   $533,931   $1,690,647   $2,329,122 
Earnings (losses) from unconsolidated affiliates   -    -    -    -    (5)
Investment income (loss)   (742)   (1,437)   2,036    (1,904)   8,709 
Total revenues and other income   437,610    756,639    535,967    1,688,743    2,337,826 
                          
Costs and other deductions:                         
Direct costs   270,397    475,461    326,557    1,058,794    1,493,082 
General and administrative expenses   46,168    63,577    46,244    149,796    196,159 
Research and engineering   7,565    12,004    7,305    26,279    37,444 
Depreciation and amortization   206,862    221,557    211,120    645,045    650,267 
Interest expense   52,403    51,291    51,206    158,331    155,134 
Impairments and other charges   5,017    3,629    57,852    339,303    106,007 
Other, net   (425)   5,005    (30,795)   (48,330)   30,598 
Total costs and other deductions   587,987    832,524    669,489    2,329,218    2,668,691 
                          
Income (loss) from continuing operations before income taxes   (150,377)   (75,885)   (133,522)   (640,475)   (330,865)
Income tax expense (benefit)   (3,695)   23,903    4,446    18,444    65,100 
                          
Income (loss) from continuing operations, net of tax   (146,682)   (99,788)   (137,968)   (658,919)   (395,965)
Income (loss) from discontinued operations, net of tax   22    157    23    (48)   (34)
                          
Net income (loss)   (146,660)   (99,631)   (137,945)   (658,967)   (395,999)
                          
Less: Net (income) loss attributable to noncontrolling interest   (10,805)   (19,297)   (10,167)   (38,437)   (44,202)
Net income (loss) attributable to Nabors  $(157,465)  $(118,928)  $(148,112)  $(697,404)  $(440,201)
Less: Preferred stock dividend  $(3,653)  $(4,310)  $(3,653)  $(10,958)  $(12,935)
Net income (loss) attributable to Nabors common shareholders  $(161,118)  $(123,238)  $(151,765)  $(708,362)  $(453,136)
                          
Amounts attributable to Nabors common shareholders:                         
Net income (loss) from continuing operations  $(161,140)  $(123,395)  $(151,788)  $(708,314)  $(453,102)
Net income (loss) from discontinued operations   22    157    23    (48)   (34)
Net income (loss) attributable to Nabors common shareholders  $(161,118)  $(123,238)  $(151,765)  $(708,362)  $(453,136)
                          
Earnings (losses) per share:                         
Basic from continuing operations  $(23.42)  $(18.27)  $(22.13)  $(102.25)  $(66.70)
Basic from discontinued operations   -    0.02    -    (0.01)   - 
Total Basic  $(23.42)  $(18.25)  $(22.13)  $(102.26)  $(66.70)
                          
Diluted from continuing operations  $(23.42)  $(18.27)  $(22.13)  $(102.25)  $(66.70)
Diluted from discontinued operations   -    0.02    -    (0.01)   - 
Total Diluted  $(23.42)  $(18.25)  $(22.13)  $(102.26)  $(66.70)
                          
Weighted-average number of common shares outstanding:                         
Basic   7,064    7,041    7,052    7,056    7,029 
Diluted   7,064    7,041    7,052    7,056    7,029 
                          
Adjusted EBITDA  $114,222   $207,034   $153,825   $455,778   $602,437 
                          
Adjusted operating income (loss)  $(92,640)  $(14,523)  $(57,295)  $(189,267)  $(47,830)

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   June 30,   December 31, 
(In thousands)  2020   2020   2019 
   (Unaudited)     
ASSETS               
Current assets:               
Cash and short-term investments  $513,825   $494,278   $452,496 
Accounts receivable, net   347,212    349,005    453,042 
Assets held for sale   562    562    2,530 
Other current assets   301,413    309,077    340,598 
Total current assets   1,163,012    1,152,922    1,248,666 
Property, plant and equipment, net   4,225,034    4,395,725    4,930,549 
Goodwill   -    -    28,380 
Other long-term assets   429,262    433,768    553,063 
Total assets  $5,817,308   $5,982,415   $6,760,658 
                
LIABILITIES AND EQUITY               
Current liabilities:               
Current portion of debt  $-   $-   $- 
Other current liabilities   486,018    523,690    656,548 
Total current liabilities   486,018    523,690    656,548 
Long-term debt   3,290,303    3,276,103    3,333,220 
Other long-term liabilities   242,737    241,005    295,333 
Total liabilities   4,019,058    4,040,798    4,285,101 
                
Redeemable noncontrolling interest in subsidiary   438,486    434,131    425,392 
                
Equity:               
Shareholders' equity   1,255,648    1,413,147    1,982,811 
Noncontrolling interest   104,116    94,339    67,354 
Total equity   1,359,764    1,507,486    2,050,165 
Total liabilities and equity  $5,817,308   $5,982,415   $6,760,658 

 

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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)  2020   2019   2020   2020   2019 
Operating revenues:                         
U.S. Drilling  $130,243   $307,808   $173,784   $578,928   $951,419 
Canada Drilling   10,774    12,191    3,564    39,929    48,895 
International Drilling   248,392    328,278    301,078    886,580    992,439 
Drilling Solutions   29,324    62,286    33,129    117,837    192,291 
Rig Technologies (1)   28,466    63,106    33,582    104,198    207,610 
Other reconciling items (2)   (8,847)   (15,593)   (11,206)   (36,825)   (63,532)
Total operating revenues  $438,352   $758,076   $533,931   $1,690,647   $2,329,122 
                          
Adjusted EBITDA: (3)                         
U.S. Drilling  $60,520   $120,936   $77,659   $239,988   $370,865 
Canada Drilling   2,150    1,466    (564)   9,517    9,981 
International Drilling   71,885    95,214    93,510    256,904    267,825 
Drilling Solutions   7,129    23,471    9,411    35,979    66,978 
Rig Technologies (1)   1,309    2,173    3,176    1,307    3,037 
Other reconciling items (4)   (28,771)   (36,226)   (29,367)   (87,917)   (116,249)
Total adjusted EBITDA  $114,222   $207,034   $153,825   $455,778   $602,437 
                          
Adjusted operating income (loss): (5)                         
U.S. Drilling  $(39,162)  $12,427   $(23,395)  $(69,961)  $57,502 
Canada Drilling   (3,507)   (5,701)   (5,795)   (9,265)   (11,297)
International Drilling   (16,872)   2,466    276    (20,743)   (10,055)
Drilling Solutions   (3,583)   16,145    1,733    8,699    42,793 
Rig Technologies (1)   (1,807)   (641)   (1,492)   (11,450)   (5,293)
Other reconciling items (4)   (27,709)   (39,219)   (28,622)   (86,547)   (121,480)
Total adjusted operating income (loss)  $(92,640)  $(14,523)  $(57,295)  $(189,267)  $(47,830)
                          
Rig activity:                         
Average Rigs Working: (6)                         
Lower 48   48.2    107.8    57.2    64.7    111.3 
Other US   5.2    6.3    6.6    6.4    7.7 
U.S. Drilling   53.4    114.1    63.8    71.1    119.0 
Canada Drilling   7.4    7.7    2.2    8.8    10.4 
International Drilling   71.3    87.7    82.4    80.1    88.7 
Total average rigs working   132.1    209.5    148.4    160.0    218.1 
                          
Daily Rig Revenue:                         
Lower 48  $21,764   $25,895   $24,744   $25,120   $25,827 
Other US   71,175    87,485    74,825    76,214    78,872 
U.S. Drilling (8)   26,548    29,301    29,927    29,712    29,278 
Canada Drilling   15,867    17,248    18,105    16,622    17,199 
International Drilling   37,842    40,671    40,129    40,375    40,997 
                          
Daily Rig Margin: (7)                         
Lower 48  $9,527   $10,231   $10,449   $9,964   $10,208 
Other US   48,636    49,446    46,032    45,861    41,853 
U.S. Drilling (8)   13,314    12,400    14,132    13,190    12,267 
Canada Drilling   4,203    3,799    899    4,880    4,955 
International Drilling   12,678    13,739    14,091    13,446    12,990 

 

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(1) Includes our oilfield equipment manufacturing, automated systems, and downhole tools.
   
(2) Represents the elimination of inter-segment transactions related to our Rig Technologies operating segment.
   
(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.
   
(7) Daily rig margin represents operating revenue less operating expenses, divided by the total number of revenue days during the quarter.
   
(8) The U.S. Drilling segment includes the Lower 48, Alaska, and Gulf of Mexico operating areas.

 

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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)  2020   2019   2020   2020   2019 
Adjusted EBITDA  $114,222   $207,034   $153,825   $455,778   $602,437 
Depreciation and amortization   (206,862)   (221,557)   (211,120)   (645,045)   (650,267)
Adjusted operating income (loss)   (92,640)   (14,523)   (57,295)   (189,267)   (47,830)
                          
Earnings (losses) from unconsolidated affiliates   -    -    -    -    (5)
Investment income (loss)   (742)   (1,437)   2,036    (1,904)   8,709 
Interest expense   (52,403)   (51,291)   (51,206)   (158,331)   (155,134)
Impairments and other charges   (5,017)   (3,629)   (57,852)   (339,303)   (106,007)
Other, net   425    (5,005)   30,795    48,330    (30,598)
Income (loss) from continuing operations before income taxes  $(150,377)  $(75,885)  $(133,522)  $(640,475)  $(330,865)

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 

   September 30,   June 30,   December 31, 
(In thousands)  2020   2020   2019 
   (Unaudited)     
Current portion of debt  $-   $-   $- 
Long-term debt   3,290,303    3,276,103    3,333,220 
Total Debt   3,290,303    3,276,103    3,333,220 
Less: Cash and short-term investments   513,825    494,278    452,496 
Net Debt  $2,776,478   $2,781,825   $2,880,724 

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF FREE CASH FLOW TO

NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30, 
(In thousands)  2020   2020   2020 
Net cash provided by operating activities  $46,134   $142,610   $247,906 
Less: Net cash used for investing activities   (37,193)   (41,376)   (129,342)
Free cash flow  $8,941   $101,234   $118,564 

 

Free cash flow represents net cash provided by operating activities less cash used for investing activities. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base. 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, because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

 

1 11/3/2020 NABORS INDUSTRIES LTD. 3Q Earnings Presentation

 

 

2 Forward Looking Statements 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 27 A of the U . S . Securities Act of 1933 and Section 21 E 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: • The Covid - 19 pandemic and its impact on oil and gas markets and prices; • 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 further downgrade in our credit rating, covenant restriction s, 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; • changes in tax laws and the possibility of changes in other laws and regulation; • the possibility of political or economic instability, civil disturbance, war or acts of terrorism in any of the countries in whi ch we do business; • the possibility of changes to U.S. trade policies and regulations including the imposition of trade embargoes or sanctions; a nd • 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 outbreak of the novel coronavirus (“COVID - 19 ”), together with actions by large oil and natural gas producing countries, has led to decreases in commodity prices, specifically oil and natural gas prices, resulting from oversupply and demand weakness . These price decreases caused significant disruptions and volatility in the global marketplace during 2020 . Lower prices and the resulting weakness in demand for our services, which have negatively affected our results of operations and cash flows, have persisted into the fourth quarter, and uncertainty remains regarding the length and impact of COVID - 19 on the energy industry and the outlook for our business . 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 .

 

 

Recent Company Highlights Generated Free Cash Flow in 3Q after funding semiannual interest payments on notes maintained capacity and interest rate eliminated leverage covenant including RigCloud ® , SmartNAV ™, SmartSLIDE ™ in 3Q20 resulting in a 23% sequential increase in revenue Amended Revolving Credit Facility in the open market in 3Q20, at a discount Repurchased ~$47 Million of Debt resulting in estimated cumulative savings of ~$260 million in 2Q - 4Q 2020 Cost Reductions and Capital Discipline Increased Installations of Digital Services on Nabors Lower 48 Rigs ESG Improved ISS Social Score by 3 points in 3Q20 reflecting heightened focus on ESG

 

 

4 3Q Rig Utilization and Availability RIG FLEET (1) 399 3Q20 AVERAGE RIGS WORKING 132 AVERAGE UTILIZATION 33% (1) As of September 30, 2020 Note: Subtotals may not foot due to rounding TOTAL U.S. OFFSHORE 12 2 18% CANADA 16 3 21% ALASKA 35 7 19% INTERNATIONAL 148 71 48% 188 48 26% U.S. LOWER 48 HIGH SPEC 110 HIGH SPEC 48 HIGH SPEC 44%

 

 

5 Growing position with the top customers in the Lower 48 % OF LOWER 48 DRILLING REVENUE 63% 14% 23% 3Q 2020 48% 11% 41% Market Peak 2014 TIER 1 TIER 2 TIER 3 Successfully Improving Customer Mix

 

 

48% 26% 7% 3% 7% 10% 3Q 2020 NBR HP PTEN ESI PDS Other 22% 39% 22% 7% 0% 9% 2014 6 Building L48 Market Share with the Supermajors The leader in the supermajors market segment, Nabors more than doubled market share compared to the peak in 2014. “Nabors has invested heavily in their fleet and support services. They’ve also made tough decisions to ensure the right talent is in their front - line leadership positions.” “ Best in - basin rig performance. Attentive corporate and field personnel.” “New technology, consistently evolving. Quality performance and excellent service.” Major Independent Major Independent Supermajor “I gave Nabors a 9 for their quality, forward - thinking mentality, low NPT and performance - minded personnel.” Supermajor

 

 

7 Powering Rigs with Alternative Power Sources & Dual Fuel 40 dual - fuel - capable rigs in Lower 48 Deployed first unit in 1985 on the North Slope of Alaska • Highline - capable • Gas - capable with turbine Rig27E in Deadhorse Alaska

 

 

8 Smart Technology Portfolio Former Names Current Names Product Description Rigtelligent ® , Rigtelligence ™ Smart ROS ™ Rig operating system for machine and process automation apps WellProg ™ Smart PLAN ™ Interactive rig activity planning, scheduling and coordination system ROCKit ® Pilot Smart SLIDE ™ Automated directional steering control system Navigator™ Smart NAV ™ Directional guidance platform; generates automated steering instructions DrillSmart ® , ROP Cruise Control™ Smart CRUISE ™ Adaptive autodriller with set - point optimization Smart Family Expansion Smart FILL ™ Tubular fill - up while running casing Smart DECODE ™ Integrated downlinking to downhole tools Smart DOC ™ Digital Operations Center Smart TRIP ™ Automated tripping Smart CONNECT ™ Drilling and casing connection automation Smart DRILL ™ Process Automation

 

 

9 Nabors Drilling Solutions Penetration Growing preference for NDS services on Nabors rigs • NDS continues to grow service penetration on Nabors rigs. Percentage of rigs with 5 or more services grew by 23% 3Q versus 2Q • 42% increase in NDS revenue per Nabors rig since 4Q 2019 • Expanding customer base as a result of realized value of NDS service suite, coupled with growth of new products on Nabors rigs 1.00 1.10 1.25 1.42 3% 56% 3% Q1’20 42% Q4’19 60% 2% 38% 61% 36% Q2’20 84% 14% 2% Q3’20 5+ services NDS Revenue/ NBR Rig Index * 2 - 4 services 1 service NDS S ervices on Nabors L48 R igs (% of Rigs) *Indexed NDS Revenue/Nabors Rig with Q4’19=1

 

 

20% 29% 44% 6% 19% 1Q20 2Q20 3Q20 SmartNAV TM / SmartSLIDE TM SmartDRILL TM Smart Apps Penetration (% of Nabors rigs) 3.3 1.8 1.6 1.7 Jun 20 Sep 20 Jul 20 Aug 20 L48 Directional Drilling Personnel Per Rig: On Location & Remote Ops - 50% NDS Smart Apps Update Smart apps Life To Date 3Q20 Wells SmartNAV ™ 1,231 66 SmartSLIDE ™ 581 66 SmartDRILL ™ 86 35 Footage (ft. i n millions) SmartNAV ™ 22.0 1.1 SmartSLIDE ™ 10.9 1.2 SmartDRILL ™ 1.6 0.6 Increasing automation driving performance and de - manning Added emphasis on remote operations and cross functional staff Increased Smart applications penetration on Nabors rigs YTD 2020 despite contracting market conditions Align with customer focus to de - man and automate wellsite operations 50% decrease in personnel per job for NDS Directional Drilling operations 2Q - 3Q ( SmartSLIDE ™ / SmartNAV ™ and Wellbore Placement)

 

 

11 SmartPLAN ™ Integrating rig operations into preplanned digital processes to scale cost savings and efficiencies Efficient Planning Digitizing the well program drives a systematic approach with predictable results Integration Seamlessly blends workflow into the SmartROS ™ system for differential performance Manage Automation Process coordination improves productivity and enhances operational capabilities Safety and Delivery Proven industry - leading safety culture and best practices developed collaboratively Digitize the Well Program Standardization of all workflows aligns procedures and enables intelligent decision making Real - Time Performance Optimization Leverages recipe - driven workflows to reduce operational variances SmartPLAN ™ rig planning, scheduling & coordination

 

 

12 Platform 2 Data is delivered from Edge devices to the cloud Field crew executes drilling plan using RigCLOUD ® applications 1 3 Real - time visibility and analytics drive performance 4 Remote team in Digital Operations Center manages instructions MWD Suite SmartNAV ™ RigCLOUD ® LiveOps RigCLOUD ® Metrics SmartPLAN ™ RigCLOUD ® Edge Partner Apps Cybersecurity Remote Visualization Digital Operations Center RigCLOUD ® Apps Go beyond remote monitoring and collaborate with your team at the rig site.

 

 

129 173 575 775 600 400 752 $0 $500 $1,000 $1,500 $2,000 2020 2021 2022 2023 2024 2025 2026 2027 2028 Bonds, Notes & Other Revolving Credit Facility (1) (2) 13 (1) Annual figures shown in millions at maturity value (2) Debt balances reflect carrying values as of September 30, 2020 As of September 30, 2020 outstanding balance maturing in 2021 is $129 million Debt at 9/30/2020 Total Debt: $3.29Bn (2) Cash, Cash Equivalents & STI $0.51Bn Total Debt Less Cash, Cash Equiv. & STI $2.78Bn (2) (1) Debt Maturity Profile as of September 30, 2020

 

 

nabors.com Contact Us: William C. Conroy VP - Corporate Development and Investor Relations William.Conroy@nabors.com Kara K. Peak Director - Corporate Development and Investor Relations Kara.Peak@nabors.com NABORS CORPORATE SERVICES 515 W. Greens Road Suite 1200 Houston, TX 77067 - 4525

 

 

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