(Nabors, 24.Apr.2024) — Nabors Industries Ltd. (NYSE: NBR) reported first quarter 2024 operating revenues of $734mn, compared to operating revenues of $726mn in the fourth quarter of 2023. The net loss attributable to Nabors shareholders for the quarter was $34mn, compared to a net loss of $17mn in the fourth quarter. This equates to a loss of $4.54 per diluted share, compared to a loss per diluted share of $2.70 in the fourth quarter. The first quarter results included a gain, related to mark-to-market treatment of Nabors warrants, of $6mn, or $0.62 per diluted share, compared to a gain of $10mn, or $1.14 per diluted share, in the fourth quarter. First quarter adjusted EBITDA was $221mn, compared to $230mn in the previous quarter.
Highlights
- Nabors was awarded three rigs in Argentina, on multiyear contracts with attractive economics. The company will redeploy inactive rigs from the Lower 48 market. These awards further solidify Nabors’ position in this key market.
- Received notification of commercial qualification for three rigs in a major market in the Middle East. The company plans to deploy existing in-country rigs for this opportunity.
- A Lower 48 drilling contractor has begun standardizing its entire fleet to Nabors RigCLOUD® platform. This development clearly demonstrates the value of Nabors third-party strategy.
- Canrig received an order for six land drilling packages from an existing client in the Middle East. This latest order is recognition of the excellent track record we have established with this customer.
- Nabors was named a double finalist for the Reuters Global Energy Transition Awards 2024 in the “Portfolio Transformation” and “Technology Whitespace” categories.
Anthony G. Petrello, Nabors Chairman, CEO and President, commented, “Our first quarter operating results were stronger than we expected, driven by resilient pricing and lower costs in our Lower 48 drilling operations, as well as higher than forecast OEM repair revenue and energy transition revenue in our Rig Technologies segment.
“Rig count increased in our International segment, driven by rig startups in Saudi Arabia and Algeria, as part of our commitment to deploy seven rigs in these two countries during 2024. We have also received recent awards in Argentina for three more rigs. I believe we are in the midst of the largest opportunity that we’ve seen in the last decade to strengthen our international business.
“Pricing in the Lower 48 market remained firm, as utilization of our highest specification rigs stayed strong across several important markets. Average rig count increased compared to the prior quarter, but was slightly below our estimates, mainly reflecting activity reductions in natural gas basins. Results in our Drilling Solutions segment reflected reduced activity in the Lower 48, partially offset by better growth from international markets.”
Segment Results
The U.S. Drilling segment reported first quarter adjusted EBITDA of $120.4mn, compared to $118.4mn in the fourth quarter of 2023. Nabors’ first quarter Lower 48 average rig count totaled 72, up from 70 in the prior quarter. Daily adjusted gross margin in that market averaged $16,011, a decrease of $229 sequentially.
International Drilling adjusted EBITDA totaled $102.5mn, compared to $105.5mn in the fourth quarter. Rig count averaged 81, up from 80 in the previous quarter, driven by rig startups in Algeria and the prior start of a newbuild in Saudi Arabia. The impact of this higher rig count was offset by downtime related to rig certification requirements following recent contract renewals in Saudi Arabia, as well as labor unrest on several rigs in Colombia. Daily adjusted gross margin for the fourth quarter averaged $16,061. International Drilling segment revenue of $349mn increased by 9% compared to the first quarter of 2023, as average rig count increased by nearly five rigs.
Drilling Solutions adjusted EBITDA was $31.8 million, compared to $34.5mn in the fourth quarter. Revenue on Nabors rigs operating in the Lower 48 and international markets increased sequentially.
In Rig Technologies, adjusted EBITDA reached $6.8mn, versus $8.8mn in the fourth quarter. OEM rental and repair EBITDA increased sequentially, while other aftermarket, capital equipment, and energy transition EBITDA declined following seasonally strong year end deliveries.
Adjusted Free Cash Flow
Adjusted free cash flow was $8mn in the first quarter. Capital expenditures totaled $112mn, which included $35mn supporting the newbuilds in Saudi Arabia. This compares to $124mn in the fourth quarter, including $43mn supporting the newbuilds.
William Restrepo, Nabors CFO, stated, “Results across our operations were higher than we forecast. The strength of the international drilling markets continues to surprise us to the upside with the recent awards in Argentina and the notification on a tender in another Middle East market, on top of the material ongoing deployments in Saudi Arabiaand Algeria. We restarted two rigs in Algeria during the first quarter, and a third in early April. Algeria has historically been an important market for Nabors, and the recommencement of operations with existing rigs marks a key development for us. Looking to the second quarter, we expect our international rig count to increase with a newbuild in Saudi Arabia and the fourth rig in Algeria. We expect the ongoing deployments and the more recent awards, as well as several open opportunities, to generate a material increase in our International EBITDA over the already targeted increase for 2025.
“Firm pricing in the Lower 48 bolstered daily gross margin. We again reduced costs in this market. Looking to the second quarter, we continue to experience sluggish activity in the natural gas basins. This should keep average rig count slightly below the average for the first quarter.
“We retired both the convertible notes that were due in January 2024 and the senior notes due in 2025, with the proceeds from our $650mn notes offering in the fourth quarter of 2023. Our next maturity is in 2026.
“We still have a number of open international tenders and active negotiations. It’s increasingly evident that the robust trends in our international segment should continue to provide us with high return opportunities with attractive payback periods. Nonetheless, we intend to avoid taking on more than we can afford. We will remain focused on generating free cash flow and reducing our net debt.”
Outlook
Nabors expects the following metrics for the second quarter of 2024:
U.S. Drilling
- Lower 48 average rig count of approximately 70 rigs
- Lower 48 daily adjusted gross margin of approximately $15,500
- Alaska and Gulf of Mexico adjusted EBITDA of approximately $21mn
International
- Average rig count up by two to three rigs versus the first quarter average
- Daily adjusted gross margin of approximately $15,700
Drilling Solutions
- Adjusted EBITDA of $30mn – $32mn
Rig Technologies
- Adjusted EBITDA of $8mn – $10mn
Capital Expenditures
- Capital expenditures of approximately $190mn, with approximately $70mn for the newbuilds in Saudi Arabia
- Full-year capital expenditures of approximately $590mn, including funding for the recent rig awards
Mr. Petrello concluded, “I am pleased with our early success to secure additional backlog in our international business. We are targeting several more opportunities and are optimistic for additional success. We also see growing adoption of our advanced technology, both in the U.S. on third-party rigs and in international markets. These developments validate our strategy and should drive future free cash flow.”
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