Press Release

Nabors Announces Third-Quarter Results

Company Release - 10/25/2016 6:02 PM ET

HAMILTON, Bermuda, Oct. 25, 2016 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors") (NYSE: NBR) today reported third-quarter 2016 operating revenues of $519.7 million, compared to operating revenues of $571.6 million in the second quarter of 2016.  Net income from continuing operations, attributable to Nabors, for the current quarter was a loss of $99.0 million, or $0.35 per diluted share, compared to a loss of $183.7 million, or $0.65 per diluted share, last quarter.     

Anthony Petrello, Nabors' Chairman, President, and CEO, commented, "After a challenging downturn, we are experiencing significant utilization increases in our Lower 48 market, although spot market pricing continues to remain competitive.  Similarly, our international markets are showing signs of impending activity increases.  We are very encouraged by our customers' acceptance of our newest rig, the PACE®-M800.  We now have contracts for the first four M800s, with two already deployed, and awards for two more.  Likewise, the high demand for our PACE®-X rigs has brought the utilization of that fleet to over 80%.  This increased demand is beginning to exert upward pressure on pricing for these top-end rigs, although, in the near-term, our fleet average margins will remain under pressure due to expiring long-term contracts.  We are also implementing a cost-effective plan to enhance other classes of our existing AC rig fleet to incorporate most of the features of these rigs.  Regardless of how the recovery unfolds, we expect our reduced cost structure, improved performance and our various technology initiatives to significantly increase operating leverage across our global fleet.    

"We recorded a sequential decline in adjusted operating income, as a modest increase in Rig Services was more than offset by reduction in one-time gains in Drilling, as compared to the second quarter.  We expect this trend in operating income to continue into the beginning of 2017 driven by lower U.S. Drilling margins and International utilization."    

Segment Results

Adjusted operating income for the Company was a loss of $72.0 million during the quarter. Drilling and Rig Services adjusted operating income was a loss of $38.4 million compared to a loss of $25.0 million in the second quarter.  Quarterly adjusted EBITDA for the Company decreased sequentially to $148.7 million, a 10% decline from the previous quarter due to a reduction in certain revenue items that were discrete to each quarter.  For the quarter, the Company averaged 163.5 rig years operating at an average gross margin of $14,029 per rig day, compared to 159.1 rigs at $15,850 per rig day in the second quarter and 187.9 rig years at an average gross margin of $13,407 per rig day in the first quarter.    

International adjusted EBITDA decreased by 1% sequentially to $148.8 million.  A reduction of four rig years in this segment was mostly offset by an increase in margin.  Compared to the third quarter, the Company expects quarterly adjusted EBITDA to remain under pressure in the near term.  The Company is encouraged by planned startups at the beginning of the year, as well as, increased tendering activity with mid-2017 start dates.  Canada operations should reflect the seasonally stronger winter activity, although the rebound should be less robust than usual. 

The U.S. Drilling segment posted adjusted EBITDA of $37.3 million for the quarter, reflecting further margin erosion offset by a 7% increase in rig years.  The Lower 48 operation saw a 13% increase in rigs working compared to the second quarter, with an average rig count of 50.  The Company is currently working 61 rigs in the Lower 48 operation.  The recent start-up of rig CDR-3 and seasonal winter activity will benefit near-term Alaskan results.   

Rig Services, which consists of the Company's manufacturing, directional drilling, and complementary services, reported a loss in adjusted EBITDA of $4.3 million, representing a $6.1 million improvement over the second quarter.  This increase is primarily attributable to reduced costs and higher revenues from service and repair operations.  The Company expects this trend to continue.

William Restrepo, Nabors' Chief Financial Officer, stated, "Third-quarter performance by our company has confirmed the trends we had foreseen after the second quarter. First, our International business has remained healthy and continues to provide strong cash generation. Second, our rig count in the Lower 48 market has rebounded. Our working rigs have increased by 66% since our trough in early April, and we have gained market share, mainly on strong demand for our PACE®-X rigs. Third, as anticipated, the daily margins for our Lower 48 rigs eroded some more, some term contracts expired, and we added more rigs at the currently lower spot rates. We expect this deterioration to continue near-term. Finally, our focus on costs at all levels of the organization has paid off, as we have mitigated the impact of average dayrate declines in the U.S., contained our SG&A expense in the face of an uptick in rig count and controlled our capital expenditures."

Mr. Petrello concluded, "Recent increases in Lower 48 activity and stabilizing oil prices are encouraging.   We are experiencing utilization increases across many of our AC rig classes, particularly our pad-optimal PACE®-X and M800 rigs, which are rapidly approaching full utilization.  All of our new-build rigs are deployed with our new Rigtelligent™ modular-code operating system and we have commenced retrofitting most of our AC fleet.  This operating system effectively automates routine tasks and integrates downhole processes with the rig.  The incorporation of this operating system together with on-ging enhancements to our other AC rig classes, will give us 100 pad-optimal, high-specification, automated rigs by mid-2017.  We believe these actions position us well to address the changing market dynamic both in the United States and internationally."

About Nabors

Nabors Industries (NYSE: NBR) owns and operates the world's largest land-based drilling rig fleet and is a leading provider of offshore platform rigs in the United States and numerous international markets. Nabors also provides directional drilling services, performance tools, and innovative technologies throughout many of the most significant oil and gas markets. 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 above 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 exclude certain cash expenses that we are obligated to make.  However, management evaluates the performance of our 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 our ongoing profitability and performance. In addition, securities analysts and investors use these measures as some of the metrics on which they analyze the company's performance. Other companies in our 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 Contact:  Dennis A. Smith, Vice President of Corporate Development & Investor Relations, +1 281-775-8038.  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












CONSOLIDATED STATEMENTS OF INCOME (LOSS)












(Unaudited)














Three Months Ended


Nine Months Ended



September 30,


June 30,


September 30,












(In thousands, except per share amounts)


2016


2015


2016


2016


2015












Revenues and other income:











  Operating revenues 


$  519,729


$  847,553


$  571,591


$ 1,688,891


$ 3,125,565

  Earnings (losses) from unconsolidated affiliates


2


(35,100)


(54,769)


(221,918)


(29,714)

  Investment income (loss)


310


(22)


270


923


2,128

    Total revenues and other income


520,041


812,431


517,092


1,467,896


3,097,979












Costs and other deductions:











Direct costs


306,436


518,174


341,279


1,012,738


1,926,306

General and administrative expenses


56,078


72,032


56,624


175,036


263,272

Research and engineering


8,476


9,716


8,180


24,818


31,899

Depreciation and amortization


220,713


240,107


218,913


655,444


739,322

Interest expense


46,836


44,448


45,237


137,803


135,518

Other, net


10,392


259,731


74,607


267,403


205,227

      Total costs and other deductions


648,931


1,144,208


744,840


2,273,242


3,301,544












Income (loss) from continuing operations before income taxes


(128,890)


(331,777)


(227,748)


(805,346)


(203,565)












Income tax expense (benefit)


(31,051)


(80,898)


(41,183)


(124,298)


(35,158)












Income (loss) from continuing operations, net of tax


(97,839)


(250,879)


(186,565)


(681,048)


(168,407)

Income (loss) from discontinued operations, net of tax


(12,187)


(45,275)


(984)


(14,097)


(41,067)












Net income (loss)


(110,026)


(296,154)


(187,549)


(695,145)


(209,474)

     Less: Net (income) loss attributable to noncontrolling interest


(1,185)


320


2,899


990


453

Net income (loss) attributable to Nabors


$(111,211)


$(295,834)


$(184,650)


$  (694,155)


$  (209,021)












Amounts attributable to Nabors:











Net income (loss) from continuing operations


$   (99,024)


$(250,559)


$(183,666)


$  (680,058)


$  (167,954)

Net income (loss) from discontinued operations


(12,187)


(45,275)


(984)


(14,097)


(41,067)

Net income (loss) attributable to Nabors


$(111,211)


$(295,834)


$(184,650)


$  (694,155)


$  (209,021)












Earnings (losses) per share:











   Basic from continuing operations


$         (.35)


$         (.86)


$         (.65)


$         (2.41)


$           (.57)

   Basic from discontinued operations


(.04)


(.16)


-


(.05)


(.15)

     Basic


$         (.39)


$       (1.02)


$         (.65)


$         (2.46)


$           (.72)












   Diluted from continuing operations


$         (.35)


$         (.86)


$         (.65)


$         (2.41)


$           (.57)

   Diluted from discontinued operations


(.04)


(.16)


-


(.05)


(.15)

     Diluted


$         (.39)


$       (1.02)


$         (.65)


$         (2.46)


$           (.72)


































Weighted-average number of common shares outstanding:











   Basic 


276,707


284,112


276,550


276,369


285,186

   Diluted 


276,707


284,112


276,550


276,369


285,186























Adjusted EBITDA (1)


$  148,739


$  247,631


$   165,508


$    476,299


$    904,088












Adjusted operating income (loss) (2)


$   (71,974)


$      7,524


$   (53,405)


$  (179,145)


$    164,766












 

(1)

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. However, management evaluates the performance of our operating segments and the Company's consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our 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".



(2)

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. However, management evaluates the performance of our operating segments and the Company's consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our 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".

 








NABORS INDUSTRIES LTD. AND SUBSIDIARIES








CONDENSED CONSOLIDATED BALANCE SHEETS


















September 30,


June 30,


December 31, 

(In thousands)


2016


2016


2015



(Unaudited)



ASSETS







Current assets:







Cash and short-term investments


$         200,650


$    255,856


$        274,589

Accounts receivable, net


503,966


504,099


784,671

Assets held for sale


69,436


86,608


75,678

Other current assets


336,668


344,680


340,959

     Total current assets


1,110,720


1,191,243


1,475,897

Property, plant and equipment, net


6,616,711


6,765,257


7,027,802

Goodwill


167,131


167,275


166,659

Investment in unconsolidated affiliates


889


888


415,177

Other long-term assets


529,053


531,642


452,305

     Total assets


$     8,424,504


$ 8,656,305


$     9,537,840








LIABILITIES AND EQUITY







Current liabilities:







Current debt


$                120


$           175


$             6,508

Other current liabilities


787,742


868,000


999,991

     Total current liabilities


787,862


868,175


1,006,499

Long-term debt


3,475,978


3,503,172


3,655,200

Other long-term liabilities


561,970


562,260


582,273

     Total liabilities


4,825,810


4,933,607


5,243,972








Equity:







Shareholders' equity


3,591,929


3,715,850


4,282,710

Noncontrolling interest


6,765


6,848


11,158

     Total equity


3,598,694


3,722,698


4,293,868

     Total liabilities and equity


$     8,424,504


$ 8,656,305


$     9,537,840

 












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)


2016


2015


2016


2016


2015























Operating revenues:











    Drilling & Rig Services: 











      U.S.


$         116,095


$    259,939


$        140,342


$    405,113


$ 1,034,929

      Canada


10,444


29,929


6,617


34,555


109,182

      International


363,552


516,180


401,024


1,165,631


1,413,886

      Rig Services (1)


58,950


73,521


39,248


152,051


318,204

       Subtotal Drilling & Rig Services


549,041


879,569


587,231


1,757,350


2,876,201












    Completion & Production Services:











      Completion Services


-


-


-


-


207,860

      Production Services


-


-


-


-


158,512

       Subtotal Completion & Production Services


-


-


-


-


366,372












    Other reconciling items (2)


(29,312)


(32,016)


(15,640)


(68,459)


(117,008)

      Total operating revenues


$         519,729


$    847,553


$         571,591


$ 1,688,891


$ 3,125,565












Adjusted EBITDA: (3)











    Drilling & Rig Services: 











      U.S.


$           37,299


$      94,505


$           52,878


$    141,412


$    418,749

      Canada


196


7,516


360


2,678


29,716

      International


148,833


186,451


150,618


447,760


558,550

      Rig Services (1)


(4,334)


(2,455)


(10,433)


(16,248)


25,469

       Subtotal Drilling & Rig Services


181,994


286,017


193,423


575,602


1,032,484












    Completion & Production Services:











      Completion Services


-


-


-


-


(28,110)

      Production Services


-


-


-


-


23,043

       Subtotal Completion & Production Services


-


-


-


-


(5,067)












    Other reconciling items (4)


(33,255)


(38,386)


(27,915)


(99,303)


(123,329)

      Total adjusted EBITDA


$         148,739


$    247,631


$        165,508


$    476,299


$    904,088












Adjusted operating income (loss): (5)











    Drilling & Rig Services: 











      U.S.


$         (58,876)


$     (14,034)


$         (48,328)


$  (154,763)


$      94,449

      Canada


(10,156)


(4,085)


(10,831)


(28,265)


(5,995)

      International


43,595


74,039


53,859


144,326


256,412

      Rig Services (1)


(12,937)


(10,434)


(19,657)


(43,238)


864

       Subtotal Drilling & Rig Services


(38,374)


45,486


(24,957)


(81,940)


345,730












    Completion & Production Services:











      Completion Services


-


-


-


-


(55,243)

      Production Services


-


-


-


-


(3,559)

       Subtotal Completion & Production Services


-


-


-


-


(58,802)












    Other reconciling items (4)


(33,600)


(37,962)


(28,448)


(97,205)


(122,162)

   Total adjusted operating income (loss)


$          (71,974)


$        7,524


$         (53,405)


$  (179,145)


$    164,766












Earnings (losses) from unconsolidated affiliates (6)


$                     2


$     (35,100)


$         (54,769)


$  (221,918)


$     (29,714)












Rig activity:











Rig years: (7)











   U.S.


57.3


103.0


53.7


58.6


129.8

   Canada


8.8


17.2


4.2


8.5


17.5

   International (8)


97.4


121.3


101.2


103.0


126.1

      Total rig years 


163.5


241.5


159.1


170.1


273.4

Rig hours: (9)











   U.S. Production Services


-


-


-


-


129,652

   Canada Production Services


-


-


-


-


23,947

      Total rig hours


-


-


-


-


153,599



(1)

Includes our other services comprised of our drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software services.



(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. However, management evaluates the performance of our operating segments and the Company's consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our 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. However, management evaluates the performance of our operating segments and the Company's consolidated results based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our 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 our share of the net income (loss), as adjusted for our basis difference, of our unconsolidated affiliates accounted for by the equity method, including losses of $35.1 million and $54.8 million for the three months ended September 30, 2015 and June 30, 2016, respectively, and $221.9 million and $35.9 million for the nine months ended September 30, 2016 and 2015 related to our share of the net loss of C&J Energy Services, Ltd. ("C&J"), which we reported on a quarter lag through June 30, 2016.  Beginning in the third quarter of 2016, we ceased accounting for our investment in C&J under the equity method of accounting.



(7)

Excludes well-servicing rigs, which are measured in rig hours.  Includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates.  Rig years represent a measure of the number of equivalent rigs operating during a given period.  For example, one rig operating 182.5 days during a 365-day period represents 0.5 rig years.



(8)

International rig years includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates, which totaled 2.5 years during the three months ended March 31, 2015.  As of May 24, 2015, this was no longer an unconsolidated affiliate.



(9)

Rig hours represents the number of hours that our well-servicing rig fleet operated during the period.  This fleet was included in the Completion & Production Services business that was merged with C&J Energy Services, Inc. in March 2015 and we will therefore no longer report this performance metric.

 

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)


2016


2015


2016


2016


2015












Adjusted EBITDA


$  148,739


$  247,631


$  165,508


$  476,299


$  904,088

Depreciation and amortization 


(220,713)


(240,107)


(218,913)


(655,444)


(739,322)

Adjusted operating income (loss)


(71,974)


7,524


(53,405)


(179,145)


164,766












Earnings (losses) from unconsolidated affiliates


2


(35,100)


(54,769)


(221,918)


(29,714)

Investment income (loss)


310


(22)


270


923


2,128

Interest expense


(46,836)


(44,448)


(45,237)


(137,803)


(135,518)

Other, net


(10,392)


(259,731)


(74,607)


(267,403)


(205,227)

Income (loss) from continuing operations before income taxes


$(128,890)


$(331,777)


$(227,748)


$(805,346)


$(203,565)

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES








RECONCILIATION OF NET DEBT TO TOTAL DEBT











September 30,


June 30,


December 31, 

(In thousands)


2016


2016


2015



(Unaudited)
























Current debt


$                120


$           175


$             6,508

Long-term debt


3,475,978


3,503,172


3,655,200

     Total Debt


3,476,098


3,503,347


3,661,708

Less: Cash and short-term investments


200,650


255,856


274,589

     Net Debt


$      3,275,448


$ 3,247,491


$      3,387,119

 

 

 

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SOURCE Nabors Industries Ltd.