Nabors Industries Ltd. (NBR) on Q1 2021 Results - Earnings Call Transcript

Operator: Good day, and welcome to the Nabors Industries First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode . After today’s presentation, there will be an opportunity to ask questions . Please note, this event is being recorded. I would now like to turn the conference over to William Conroy, Vice-President of Investor Relations and Corporate Development. Please go ahead sir. William Conroy: Good afternoon, everyone. Thank you for joining Nabors' first quarter 2021 earnings conference call. Today, we will follow our customary format with Tony Petrello, our Chairman, President, and Chief Executive Officer; and William Restrepo, our Chief Financial Officer, providing their perspectives on the quarter's results along with insights into our markets and how we expect Nabors to perform in these markets. In support of these remarks, a slide deck is available, both as a download within the webcast and in the Investor Relations section of nabors.com. Instructions for the replay of this call are posted on the Website as well. With us today, in addition to Tony, William, and myself, are Siggi Meissner, President of our Global Drilling Organization and other members of the senior management team. Tony Petrello: Good afternoon. Thank you for joining us as we review our results for the first quarter of 2021. This afternoon, I will begin with overview comments. Then I will follow with the discussion of the markets and highlights from the quarter. William will discuss our financial results. I will make some concluding remarks before opening up for your questions. Our performance in the first quarter exceeded the expectations which we laid out on our last conference call. We made further progress on our twin priorities of generating free cash flow and reducing net debt. Our free cash flow was especially noteworthy. In the first quarter we generated $60 million. We accomplished this after funding semi-annual cash interest payments on the outstanding notes. We generated adjusted EBITDA of $108 million. All our major segments performed well. Highlighting the earnings power of Nabors portfolio. We believe this accomplishment will rank favorably compared to the market. I am pleased with this start to 2021. I'm looking forward to reporting further progress as the year unfolds. Now I would like to spend a few moments on the macro environment. The quarter began with WTI in the high 40s. By early March, WTI exceeded $66. The price held back has been in the tight range around $60 since. William Restrepo: Thank you, Tony. And good afternoon everyone. The net loss from continuing operations of $141 million in the first quarter represented a loss of $20.16 per share. First quarter results compared to a loss of $112 million, or $16.46 per share in the fourth quarter of 2020. The fourth quarter included $162 million of pretax gains from debt exchanges and repurchases partially offset by charges of $71 million, mainly from asset impairments for a net after tax gain of $52 million or $7.40 per share. Excluding this unusual items, the net loss improved by $23 million, primarily reflecting lower depreciation and interest expense. Revenue from operations for the first quarter was $461 million, a sequential gain of 4%. Revenue improved in most of our segments, driven by increased drilling activity in the markets we serve. In the Lower 48, drilling revenue of $110 million increased by $6.2 million, or 6%, as a rig count improved by 5%. Despite some deterioration in the average pricing for a fleet, revenue per day increased by $700, reflecting a significant reduction in the number of rigs stacked on rate. Generally, stacked on rate rigs return to work as day rates increase substantially. Lower 48 average rig count at 56.2 was up sequentially by 2.6 rigs in line with our expectations. International drilling revenue at $247 million increased by 1.7 million or 1%. Despite the absence of 4 million in early termination revenue from the prior quarter. Average rig count of 64.8 increased by 2.2 rigs or 3.5% matching our expectations for the quarter. As anticipated, 8 rigs were reactivated in Saudi Arabia progressively during the first quarter. However, average rig count in the eastern hemisphere fell, reflecting mostly the contract terminations we experienced in the fourth quarter. Canada drilling revenue was $21 million, an increase of $6.2 million or 42%. Rig count increased by four rigs on the seasonal ramp up in activity. Daily revenue increased by nearly $400. Nabors drilling solutions revenue was $35.7 million, up 3.7 million or 12%, primarily driven by improved performance software and manage pressure drilling. Notably, there was continued growth of rocket with third parties and further adoption of SmartDRILL by new clients. Tony Petrello: Thank you, William. I will now conclude my remarks this afternoon with the following. As we review the first quarter results, I cannot lose sight of the fact that it was just a year ago that we began to understand the full impact of the COVID-19 virus, the effects of a global pandemic were far reaching. I think it is fair to say that virtually every aspect of our lives was impacted. The same is true for our company. As we adapted to the demands of the pandemic environment, we were forced to re-examine all of our business processes, policies and procedures. The beginning of the second year of this pandemic era reinforces our concentration on several priorities. First, we maintain a laser focus on safety. Over the past year, we continue to improve our work processes and procedures. What has become more evident is a palpable change in our underlying safety culture for the better. For this reason, I now believe that mission zero, our goal of zero safety incidents is closer to reality than any time since we introduced it. Second, our commitment to operational excellence continues, clients value and compensate for performance. Our industry leading rig level economic results, stems from a multiyear company wide effort at extending Nabors position as the global performance pillar of choice. And we're not finished yet, which brings me to the third priority. Nabors remains dedicated to extending its position as the drilling industry's technology leader. Nabors has been an innovation engine for decades, it has become clear that our industry must now transform itself. Looking ahead, our Advanced Solutions will enhance performance and efficiency, as well as sustainability. We believe our investments in robotics and automation technology will catapult us to a new level of performance. I hope you sense my enthusiasm and genuine excitement for our future. I look forward to reporting on our progress. That concludes my remarks this afternoon. Thank you for your time and attention. With that we will take your questions. Operator: We will now begin the question and answer session And the first question today will come from Karl Blunden with Goldman Sachs. Please go ahead. Karl Blunden: Thanks, good afternoon. Thanks for the time. You keep making progress on paying down some of the maturities, both on the bank side and the bond side. And curious your thoughts on what the next steps would be here you have some maturities coming to you a little bit later this year, but this morning, 23 and 24. And then liquidity levers that you see as most feasible to address this. Tony Petrello: So at this point where we have left this year, amounts to fairly manageable amount. So nothing particular needs to be done for that. And then the next maturity is coming in 2023. So at this point, I don't think it makes sense to telegraph anything, or start, we have many options. And as the market develops over the coming year, we will decide what we do about those maturities. Karl Blunden: That makes sense. And certainly you're -- the near leash guaranteed bonds are trading at levels that are relatively tight now. With regard to other ways to raise capital and maybe address some of this already. But some companies in the industry with the strong equity rally has spoken about equity linked issuance, is that something that you would consider as well in the range of options. Tony Petrello: We consider everything all the time. But again, like I said, we're not going to be telegraphing what we will do in the future because I mean, we have many options. So I don't think it makes sense to focus on anything and talk about it at this point. Karl Blunden: Fantastic. Thanks very much. Operator: And the next question will come from Taylor Zurcher with Tudor, Pickering, Holt. Please go ahead. Taylor Zurcher: Hey, good afternoon, and thank you. My first question is in international the margin guidance for us $4,500 a day It sounds like that includes some negative impact from a rig movement in Mexico and then also some negative impact from Argentina strike event. I was hoping you could help us think about the magnitude of the negative impact for both those points. And, maybe give us some guidance or just high level commentary on where do you see the margins trending once you get past Q2 and into the back half of the year. Tony Petrello: Okay, so you're right to guard the guidance was 12, five, and we expect the second Q guidance to be impacted by along with Mexico, and Australia and Argentina. I think we've indicated that we expect the rig count to grind higher throughout the course of the year. And those incremental wage will be accretive to the overall fleet. I think the issue about margins, though, is as those rigs roll out, there will be startup costs ramp up costs, that will have to, to also bear so on that basis, we'll see what happens. But we're not going to give any specific numbers for the rest of the year on margins beyond the second quarter right now. William Restrepo: So I'll add to what Tony said. I mean, the pricing right now is fairly stable to up in the international markets that deterioration in this coming quarter is slowly resulting from the rig move in Mexico. And it's really the health, health employees in Argentina that are striking and their -- they're basically blocking the roads and the access into the well sites. So that's what's going on Argentina. They are asking for higher salary increases, and they're sort of arguing with the government on what that should be. So we expect the government to sort that out pretty quickly, but nonetheless, decided to put some preventive contingency for, for those potential standby rates. Taylor Zurcher: Okay, that's helpful. And from an international activity perspective and the backdrop just feels like it has to be improved. And right now, your rig counts trending higher. And so I'm curious what sort of visibility you have towards incremental rig additions, in both Latin America and the Middle East and maybe even elsewhere, in the back half of the year. Are those things that you do have visibility on today? Or is it just a bit too early to make that comment today? Tony Petrello: Well, as I said, I think we do see visible to say, say enough right now that we think the rig count is going to grind higher during the course of the year. I think as William alluded to, we thought the inflection point occurred last quarter. And I think in the fourth in the fourth quarter, rather in the fourth quarter, and therefore we do believe that's the case that that will be in the Middle East and in Latin America. I'm not going to get into specific countries right now. Taylor Zurcher: Okay, fair enough. That's that's it for me. Operator: And our next question will come from Waqar Syed with ATB Capital Markets. Please go ahead. Waqar Syed: Thank you. Just following up on the last question on International. So some of the larger cap service companies are saying that second half, the revenues in International would be up move -- seen capital spending could be up like low double digits, maybe 12% or 13%, year-over-year. So what's your rig count international kind of mirror that that means second half, international rig count for Nabors could be like, 12%, 13% or something in that range up second half of last year, that would imply maybe 75? You know, 75,76 rigs on average in H2? Is this right way to think about it? William Restrepo: Waqar, I think you shouldn't extrapolate what the big companies are. Remember, we're indifferent. We're not in all the markets, internationally. And we're certainly not an offshore internationally. So I don't think those percentages are applicable to our fleet. But we're pretty confident given the clients that we do have some of the negotiations on-going, and some of the tenders that we feel we're very well positioned for that you will see a very nice progression of the second half of 2021. Waqar Syed: Okay, thank you. Secondly, your margin guidance for Canada. Does that include wage subsidies? William Restrepo: No. Waqar Syed: It does not. Okay. And then second, and then finally, just… William Restrepo: We don't expect a number as big as that in the second quarter. So that's what we have. Waqar Syed: Right? And then in terms of the U.S. Lower 48 drilling margins, do you think that second quarter is the bottom? William Restrepo: No. I do not. I think today in the market, Waqar we are looking at, on average current margins on a marginal basis, incremental basis is somewhere in the $6,000 range. That's where the new contracts are being signed, roughly. It's a range, of course, but that's the average. So we do believe, as Tony mentioned, and I think Tony can elaborate a little bit on that that pricing will evolve in the second half. So we'll go up from that. But it's a question on how many rigs we add and how fast. So it’s depending on how well we do with rig additions. It's good in general, but it does bring the margin slightly down. Now, we don't think well, we're hoping to hold the line at 7000. That's what we're hoping where we think we will bottom. Tony Petrello: Yes, just to add some more color there. So I think the good news is we are seeing some slight movement in leading edge pricing, particularly West Texas and East Texas. Both of those, I think as the as the high spec rig, gain utilization there, it's much more constructive pricing environment. I think South Texas, North Dakota, and the Northeast are lagging there a little bit. But in terms of pricing, leading edge pricing continues to be below our current average of the fleet. However, I think from even last quarter, we're now seeing leading edge rates in the high teens, and may be crossing over into some low 20s. So it is constructed. The question is as, as utilization drives forward in the second half, and price increases, will that offset the client that you're seeing in terms of the delta between the historical backlog of rigs versus the spot price. And as we have said, we're hoping to balance that to have some good results going in the second half. Waqar Syed: It makes sense. Then do you have a handy the your schedule of contract explorations in going forward in the coming quarters for low 48 rates. Tony Petrello: I think, I don't really have that handy. So maybe you can follow up with that Bill. Waqar Syed: I'll do that. Thanks. Thank you very much. Operator: Our next question will come from Gregg Brody with Bank of America. Please go ahead. Gregg Brody: Good afternoon, guys. Just maybe, could you clarify a bit on sign out? So you said there's four rigs coming up that are on order now? I think you said there's 100 million of CapEx. Tony Petrello: Now let me clarify. Aramco has awarded four rigs, we have not yet issued deals for all of those rings. Only for some of them. So. So that so we have an order. But yes, I mean, we expect that we will order those for rigs sometime this year. Gregg Brody: Got it? So how much CapEx at SANAD should we expect this year, I’m trying to separate what's the total CapEx for the company? And then just figure out what’s at SANAD? Tony Petrello: I think we can, we can we can talk about that at another venue. I don't have the specifics that we look at Saudi Arabia together. But what I can tell you is for the in Kingdom rigs, depending of course on the milestones and achieve the milestones by our local manufacturer, which is part of the assumption of the number that I gave earlier, we should approach somewhere in the range of $100 million this year, paid by sign up for those new bills. The rest is the rest of our CapEx spending is in line with what we've guided before, at the end of the year. And we still expect us the number one for the rest of my… Gregg Brody: And you – Am I correct, is that 65. That was the that was the guidance right? William Restrepo: No the guidance 200 million for the full year. Gregg Brody: Got it. Thanks. William Restrepo: Some number approaching 100 depending on milestones being achieved by the by the local manufacturer, paid by SANAD. Gregg Brody: So you're saying 200 million plus whatever it is between zero to 150. William Restrepo: Yes. Gregg Brody: Got it? And then you made a comment about exceptional free cash flow this year. Can you help us think through what's driving, what's what we expect from working capital harvesting? And are you are you comfortable actually giving what that exceptional free cash flow number is? William Restrepo: No I think, I think this is not just working capital. Working capital did well in the first quarter. We had maybe a few 10s of millions extra from the delays we suffered at the end of last year. We had a couple of customers that sat on their invoices, large one, so that had an impact in the fourth quarter of last year. But a lot of what you're seeing today in Nabors is driven by reductions in overheads, cuts in CapEx. And interest rates, of course, have been going down. So all those items are much more impactful that proceed or working capital, harvesting, as you said, That's not a big component of our free cash flow. Gregg Brody: Okay, got it. And one more. One last one for you. So you mentioned, you're planning on participating in the carbon transition the energy transition, which splits investments you mentioned a few of them. Can you talk a little bit about how should we think about the timing of the of those investments from your side? And when you see that becoming part of your business? Tony Petrello: Yes, well, I think some of the some of the things are internally developed from our normal course, operations. And as I said, the power management we're rolling out right now. And we have some follow on activities. The next couple quarters, you're going to see some follow on products that are add on. I don't see that it's a big capital expenditure consumer, though if that's what you're getting at. Gregg Brody: I mean, that's part of it. I'm just trying to understand what it what the business can if there is much investment required? Tony Petrello: Yes. Well, like I said, what we're what we're targeting is things that actually have scale capability. That that is our goal, to think that and that not only apply to Nabors rates it could apply more generally as well. That's the kind of thing we're looking at. And next couple quarters, I think you'll begin to see what some of those products will look like. Gregg Brody: Well, I appreciate the time, guys. Thank you. Operator: This will conclude our question-and-answer session. I'd like to turn the conference back over to Bill Conroy for any closing remarks. William Conroy: Thank you, Paul. We'll wrap the call up there. Thank you ladies and gentlemen for joining us this afternoon. If you have any questions, please give us a call or email us. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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Nabors Industries Ltd. (NYSE: NBR) Faces Financial Setbacks in Q3 2024

  • Nabors Industries Ltd. (NYSE:NBR) reported a significant loss per share of -$6.06, missing the estimated EPS by a wide margin.
  • The company's revenue for the quarter was $743.31 million, slightly below the estimated $751 million, marking a 2.46% shortfall from the Zacks Consensus Estimate.
  • Despite the financial setbacks, Nabors' adjusted EBITDA saw a slight increase to $222 million, and the company remains optimistic about future growth, especially with the acquisition of Parker Wellbore.

Nabors Industries Ltd. (NYSE: NBR) operates in the oil and gas drilling industry, providing drilling and rig services. The company faces competition from other industry players like Helmerich & Payne and Patterson-UTI Energy. Nabors recently reported its financial results for the third quarter of 2024, revealing a challenging period with significant financial setbacks.

On October 22, 2024, Nabors reported an earnings per share (EPS) of -$6.06, which was significantly lower than the estimated EPS of -$1.73. This result marks a negative surprise of 93.64%, as highlighted by Zacks. Despite this, it shows an improvement from the previous year's loss of $5.40 per share. Over the past four quarters, Nabors has consistently failed to exceed consensus EPS estimates.

Nabors' actual revenue for the quarter was $743.31 million, slightly below the estimated $751 million. This represents a 2.46% shortfall from the Zacks Consensus Estimate. The company has only surpassed consensus revenue estimates once in the last four quarters. Compared to the previous year, revenue decreased slightly from $744.14 million.

The company experienced a net loss of $56 million for the quarter, translating to a loss of $6.86 per diluted share. This is a larger loss compared to the $32 million net loss in the previous quarter. The third quarter results included net charges of approximately $25 million, mainly due to the redemption premium on the 2026 notes and market adjustments on investments.

Despite these challenges, Nabors' adjusted EBITDA increased to $222 million from $218 million in the prior quarter. Anthony G. Petrello, Nabors' Chairman, CEO, and President, expressed optimism about the company's future, particularly with the announced acquisition of Parker Wellbore. He noted that the portfolios of both companies are highly complementary, suggesting potential synergies and growth opportunities.

Nabors Industries Shares Down 7%

Nabors Industries Ltd. (NYSE:NBR) shares were trading more than 7% lower Monday afternoon following the company’s 2021 Virtual Analyst Meeting, where the company delivered a series of presentations highlighting its industry outlook and vision through 2023 and beyond, operational priorities, balance sheet outlook, and Energy Transition strategy.

Despite the stock sell-off, analysts at RBC Capital said that they came away from the session with an enhanced appreciation for the technology capability within the company and believe continued execution on its strategic priorities could potentially lead them to become more constructive as a recovery in global land drilling activity unfolds.