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Nabors Announces Second Quarter Results

Jul 31, 2018

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

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

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

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

Consolidated and Segment Results

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

The U.S. Drilling segment reported a 19% sequential increase in adjusted EBITDA, to $87 million.  Much of the increase is attributable to the April 1 commencement of full operating rate on the MODSTM 400 deepwater platform rig in the Gulf of Mexico.  In the Lower 48, average daily gross margin increased by more than $450 to $7,400, while rig count was stable.  Higher daily operating rates and improved rig-move efficiency accounted for the margin increase.

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

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

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

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

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

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

About Nabors

Nabors Industries (NYSE: NBR) owns and operates one of the world's largest land-based drilling rig fleets and is a provider of offshore platform rigs in the United States and numerous international markets. Nabors also provides directional drilling services, performance tools, and innovative technologies for its own rig fleet and those of third parties. Leveraging our advanced drilling automation capabilities, Nabors highly skilled workforce continues to set new standards for operational excellence and transform our industry.

Forward-looking Statements

The information included in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to a number of risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result, of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements.  The forward-looking statements contained in this press release reflect management's estimates and beliefs as of the date of this press release.  Nabors does not undertake to update these forward-looking statements.  

Non-GAAP Disclaimer

This press release presents certain "non-GAAP" financial measures.  The components of these non-GAAP measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America ("GAAP").  Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues.  Adjusted operating income (loss) is computed similarly, but also subtracts depreciation and amortization expenses from operating revenues. Net debt is computed by subtracting the sum of cash and short-term investments from total debt.  Each of these non-GAAP measures has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to make.  However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA, adjusted operating income (loss), and net debt, because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.  Securities analysts and investors also use these measures as some of the metrics on which they analyze the Company's performance. Other companies in this industry may compute these measures differently.  A reconciliation of adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes and net debt to total debt, which are their nearest comparable GAAP financial measures, are included in the tables at the end of this press release. 

Media ContactDennis 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 mark.andrews@nabors.com

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

           
  

Three Months Ended

 

Six Months Ended

  

June 30,

 

March 31,

 

June 30,

           

(In thousands, except per share amounts)

 

2018

 

2017

 

2018

 

2018

 

2017

           

Revenues and other income:

          

Operating revenues 

 

$  761,920

 

$  631,355

 

$  734,194

 

$ 1,496,114

 

$ 1,193,905

Earnings (losses) from unconsolidated affiliates

 

(1)

 

-

 

2

 

1

 

2

Investment income (loss)

 

(3,164)

 

(886)

 

465

 

(2,699)

 

(165)

Total revenues and other income

 

758,755

 

630,469

 

734,661

 

1,493,416

 

1,193,742

           

Costs and other deductions:

          

Direct costs

 

493,975

 

417,521

 

475,403

 

969,378

 

805,165

General and administrative expenses

 

67,823

 

63,695

 

74,571

 

142,394

 

127,104

Research and engineering

 

12,439

 

11,343

 

15,806

 

28,245

 

23,100

Depreciation and amortization

 

218,262

 

208,090

 

213,448

 

431,710

 

411,762

Interest expense

 

60,592

 

54,688

 

61,386

 

121,978

 

111,206

Other, net

 

77,601

 

10,104

 

14,089

 

91,690

 

23,614

Total costs and other deductions

 

930,692

 

765,441

 

854,703

 

1,785,395

 

1,501,951

           

Income (loss) from continuing operations before income taxes

 

(171,937)

 

(134,972)

 

(120,042)

 

(291,979)

 

(308,209)

Income tax expense (benefit)

 

23,278

 

(19,496)

 

23,545

 

46,823

 

(45,105)

           

Income (loss) from continuing operations, net of tax

 

(195,215)

 

(115,476)

 

(143,587)

 

(338,802)

 

(263,104)

Income (loss) from discontinued operations, net of tax

 

(584)

 

(15,504)

 

(75)

 

(659)

 

(15,943)

           

Net income (loss)

 

(195,799)

 

(130,980)

 

(143,662)

 

(339,461)

 

(279,047)

     Less: Net (income) loss attributable to noncontrolling interest

 

(2,953)

 

(1,971)

 

(539)

 

(3,492)

 

(2,888)

Net income (loss) attributable to Nabors

 

$ (198,752)

 

$ (132,951)

 

$ (144,201)

 

$  (342,953)

 

$  (281,935)

Less: Preferred stock dividend

 

$     (3,680)

 

$               -

 

$               -

 

$      (3,680)

 

$                -

Net income (loss) attributable to Nabors common shareholders

 

$ (202,432)

 

$  (132,951)

 

$  (144,201)

 

$  (346,633)

 

$  (281,935)

           

Amounts attributable to Nabors common shareholders:

          

Net income (loss) from continuing operations

 

$ (201,848)

 

$ (117,447)

 

$ (144,126)

 

$  (345,974)

 

$  (265,992)

Net income (loss) from discontinued operations

 

(584)

 

(15,504)

 

(75)

 

(659)

 

(15,943)

Net income (loss) attributable to Nabors common shareholders

 

$( 202,432)

 

$ (132,951)

 

$ (144,201)

 

$  (346,633)

 

$  (281,935)

           

Earnings (losses) per share:

          

   Basic from continuing operations

 

$       (0.61)

 

$       (0.41)

 

$       (0.46)

 

$         (1.08)

 

$         (0.93)

   Basic from discontinued operations

 

-

 

(0.05)

 

-

 

-

 

(0.06)

Total Basic

 

$       (0.61)

 

$       (0.46)

 

$       (0.46)

 

$         (1.08)

 

$         (0.99)

           

   Diluted from continuing operations

 

$       (0.61)

 

$       (0.41)

 

$       (0.46)

 

$         (1.08)

 

$         (0.93)

   Diluted from discontinued operations

 

-

 

(0.05)

 

-

 

-

 

(0.06)

Total Diluted

 

$       (0.61)

 

$       (0.46)

 

$       (0.46)

 

$         (1.08)

 

$         (0.99)

           
           

Weighted-average number   

          

   of common shares outstanding:

          

   Basic 

 

328,372

 

278,916

 

308,788

 

318,580

 

278,348

   Diluted 

 

328,372

 

278,916

 

308,788

 

318,580

 

278,348

           
           

Adjusted EBITDA

 

$  187,683

 

$  138,796

 

$  168,414

 

$    356,097

 

$    238,536

           

Adjusted operating income (loss)

 

$   (30,579)

 

$   (69,294)

 

$   (45,034)

 

$     (75,613)

 

$  (173,226)

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 
       
       
  

June 30,

 

March 31,

 

December 31,

(In thousands)

 

2018

 

2018

 

2017

  

(Unaudited)

  

ASSETS

      

Current assets:

      

Cash and short-term investments

 

$    636,546

 

$    393,587

 

$       365,366

Accounts receivable, net

 

780,247

 

733,541

 

698,477

Assets held for sale

 

35,963

 

36,404

 

37,052

Other current assets

 

329,715

 

330,841

 

346,441

     Total current assets

 

1,782,471

 

1,494,373

 

1,447,336

Property, plant and equipment, net

 

5,709,895

 

5,969,063

 

6,109,565

Goodwill

 

172,817

 

172,982

 

173,226

Other long-term assets

 

635,105

 

663,412

 

671,857

     Total assets

 

$ 8,300,288

 

$ 8,299,830

 

$    8,401,984

       

LIABILITIES AND EQUITY

      

Current liabilities:

      

Current portion of debt

 

$           243

 

$           375

 

$               181

Other current liabilities

 

873,539

 

766,453

 

919,295

     Total current liabilities

 

873,782

 

766,828

 

919,476

Long-term debt

 

3,818,613

 

4,256,160

 

4,027,766

Other long-term liabilities

 

310,726

 

333,438

 

311,971

     Total liabilities

 

5,003,121

 

5,356,426

 

5,259,213

       

Redeemable noncontrolling interest in subsidiary

 

208,519

 

206,396

 

203,998

       

Equity:

      

Shareholders' equity

 

3,063,034

 

2,709,608

 

2,911,816

Noncontrolling interest

 

25,614

 

27,400

 

26,957

     Total equity

 

3,088,648

 

2,737,008

 

2,938,773

     Total liabilities and equity

 

$ 8,300,288

 

$ 8,299,830

 

$    8,401,984

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SEGMENT REPORTING

(Unaudited)

           

The following tables set forth certain information with respect to our reportable segments and rig activity:

           
           
  

Three Months Ended

 

Six Months Ended

  

June 30,

 

March 31,

 

June 30,

           

(In thousands, except rig activity)

 

2018

 

2017

 

2018

 

2018

 

2017

           
           

Operating revenues:

          

U.S. Drilling

 

$ 264,395

 

$ 187,344

 

$ 241,002

 

$    505,397

 

$    349,278

Canada Drilling

 

17,442

 

17,121

 

31,887

 

49,329

 

44,929

International Drilling

 

377,986

 

380,338

 

368,845

 

746,831

 

718,561

Drilling Solutions

 

59,859

 

31,829

 

62,648

 

122,507

 

59,194

Rig Technologies (1)

 

81,321

 

61,185

 

64,669

 

145,990

 

105,261

Other reconciling items (2)

 

(39,083)

 

(46,462)

 

(34,857)

 

(73,940)

 

(83,318)

      Total operating revenues

 

$ 761,920

 

$ 631,355

 

$ 734,194

 

$ 1,496,114

 

$ 1,193,905

           

Adjusted EBITDA: (3)

          

U.S. Drilling

 

$   86,923

 

$   37,791

 

$   73,067

 

$    159,990

 

$      64,420

Canada Drilling

 

4,963

 

4,177

 

9,299

 

14,262

 

10,512

International Drilling

 

122,631

 

134,784

 

123,990

 

246,621

 

243,440

Drilling Solutions

 

14,765

 

7,623

 

14,728

 

29,493

 

10,569

Rig Technologies (1)

 

446

 

(2,151)

 

(8,684)

 

(8,238)

 

(7,204)

Other reconciling items (4)

 

(42,045)

 

(43,428)

 

(43,986)

 

(86,031)

 

(83,201)

      Total adjusted EBITDA

 

$ 187,683

 

$ 138,796

 

$ 168,414

 

$    356,097

 

$    238,536

           

Adjusted operating income (loss): (5)

          

U.S. Drilling

 

$ (13,107)

 

$ (56,079)

 

$ (19,746)

 

$     (32,853)

 

$  (119,261)

Canada Drilling

 

(4,608)

 

(5,014)

 

(592)

 

(5,200)

 

(9,025)

International Drilling

 

24,486

 

36,174

 

24,536

 

49,022

 

48,148

Drilling Solutions

 

7,546

 

3,772

 

8,721

 

16,267

 

2,794

Rig Technologies (1)

 

(3,433)

 

(5,040)

 

(12,976)

 

(16,409)

 

(13,171)

Other reconciling items (4)

 

(41,463)

 

(43,107)

 

(44,977)

 

(86,440)

 

(82,711)

   Total adjusted operating income (loss)

 

$ (30,579)

 

$ (69,294)

 

$ (45,034)

 

$     (75,613)

 

$  (173,226)

           

Rig activity:

          

Average Rigs Working: (6)

          

U.S. Drilling

 

112.1

 

100.6

 

111.8

 

112.0

 

94.7

Canada Drilling

 

10.2

 

12.4

 

21.1

 

15.6

 

17.1

International Drilling

 

93.1

 

92.7

 

94.6

 

93.8

 

91.3

      Total average rigs working

 

215.4

 

205.7

 

227.5

 

221.4

 

203.1

  

(1)

Includes our oilfield equipment manufacturing, automated systems, and downhole tools.

  

(2)

Represents the elimination of inter-segment transactions.

  

(3)

Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted EBITDA excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.  Securities analysts and investors use this measure as one of the metrics on which they analyze the Company's performance.  Other companies in this industry may compute these measures differently.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

  

(4)

Represents the elimination of inter-segment transactions and unallocated corporate expenses.

  

(5)

Adjusted operating income (loss) is computed by subtracting the sum of direct costs, general and administrative expenses, research and engineering expenses and depreciation and amortization from operating revenues. Adjusted operating income (loss) is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted operating income (loss) excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.  Securities analysts and investors use this measure as one of the metrics on which they analyze the Company's performance.  Other companies in this industry may compute these measures differently.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

  

(6)

Represents a measure of the average number of rigs operating during a given period.  For example, one rig operating 45 days during a quarter represents approximately 0.5 average rigs working for the quarter.  On an annual period, one rig operating 182.5 days represents approximately 0.5 average rigs working for the year.

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO 

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)

           
           
           
           
  

Three Months Ended

 

Six Months Ended

  

June 30,

 

March 31,

 

June 30,

           

(In thousands)

 

2018

 

2017

 

2018

 

2018

 

2017

           

Adjusted EBITDA

 

$  187,683

 

$  138,796

 

$  168,414

 

$  356,097

 

$  238,536

Depreciation and amortization 

 

(218,262)

 

(208,090)

 

(213,448)

 

(431,710)

 

(411,762)

Adjusted operating income (loss)

 

(30,579)

 

(69,294)

 

(45,034)

 

(75,613)

 

(173,226)

           

Earnings (losses) from unconsolidated affiliates

 

(1)

 

-

 

2

 

1

 

2

Investment income (loss)

 

(3,164)

 

(886)

 

465

 

(2,699)

 

(165)

Interest expense

 

(60,592)

 

(54,688)

 

(61,386)

 

(121,978)

 

(111,206)

Other, net

 

(77,601)

 

(10,104)

 

(14,089)

 

(91,690)

 

(23,614)

Income (loss) from continuing operations before income taxes

 

$ (171,937)

 

$ (134,972)

 

$ (120,042)

 

$ (291,979)

 

$ (308,209)

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 
       
  

June 30,

 

March 31,

 

December 31,

(In thousands)

 

2018

 

2018

 

2017

  

(Unaudited)

  
       

Current portion of debt

 

$           243

 

$           375

 

$               181

Long-term debt

 

3,818,613

 

4,256,160

 

4,027,766

     Total Debt

 

3,818,856

 

4,256,535

 

4,027,947

Less: Cash and short-term investments

 

636,546

 

393,587

 

365,366

     Net Debt

 

$ 3,182,310

 

$ 3,862,948

 

$    3,662,581

 

SOURCE Nabors Industries Ltd.