Nabors Announces Second Quarter Results
HAMILTON, Bermuda, Aug. 2, 2017 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors" or the "Company") (NYSE: NBR) today reported second quarter 2017 operating revenues of $631 million, compared to operating revenues of $563 million in the prior quarter. Net income from continuing operations attributable to Nabors for the quarter was a loss of $117 million, or $0.41 per diluted share, compared to a loss of $149 million, or $0.52 per diluted share, in the first quarter of 2017. The second quarter results include $7.3 million in net after-tax charges, or $0.03 per diluted share, primarily due to premiums paid on a debt redemption.
Anthony Petrello, Nabors Chairman and CEO, commented, "I am pleased with the sequential improvement in our second quarter results. This reflected meaningful increases across all of our operations except Canada, which performed better than expected during the seasonally low quarter. The results also reflected normalized operations in our largest international market and higher pricing as well as lower reactivation costs for our Lower 48 fleet. The results were aligned with our expectations and reflect positively on the steps we have taken through the downturn to control costs and enhance capabilities.
"Sequentially, we saw our Lower 48 daily average rig margins increase by 19% while our average rigs working increased by 15% to 95 rigs during the quarter. Today the 102 rigs we have working represent nearly a threefold increase compared to the low point of 35 rigs in May of 2016. We continue to realize full utilization on our highest capability rigs illustrating our customers' preference for these rigs and their features.
"Internationally our average rigs working increased sequentially for the first time in two years to 93 during the quarter compared with 90 during the first quarter of 2017. The recent oil price volatility has reduced contracting urgency for some customers. Nonetheless we see additional activity improvements in both North America and certain international markets.
"Another positive note in this quarter is the substantial improvement in results for our Nabors Drilling Solutions ("NDS") division as more customers adopt our technologies and service offering. We achieved several important milestones this quarter, and we believe that NDS results will continue to increase in coming quarters as our market penetration and margins improve."
Consolidated and Segment Results
Adjusted operating income for the Company was a loss of $69 million for the quarter, as compared to a loss of $104 million in the prior quarter. Adjusted EBITDA for the quarter increased substantially to $139 million, compared to $100 million in the first quarter. During the second quarter, the Company averaged 206 rigs working at an average gross margin of $10,809 per rig day, compared to 201 average rigs working at $9,333 per rig day during the first quarter.
The U.S. Drilling segment posted adjusted EBITDA of $38 million for the quarter with an average of 101 rigs working compared to 89 rigs during the first quarter. The Lower 48 operation increased by 12 average rigs working during the second quarter, including the deployment of two new build SmartRig(TM) units. As expected, rig reactivations resulted in additional costs during the second quarter. With fewer rigs reactivated however, the impact was lower than the prior quarter. The Company expects these costs to abate throughout the balance of the year, resulting in margin improvement.
Increased margins are also expected as around 80% of the Lower 48 rig contracts are expiring during the remainder of this year. Many of these rigs are expected to renew at higher day rates. Results should also benefit from the expected deployment, before year end, of five new build SmartRig(TM) units that are currently under construction. Additionally, there are still existing rigs being converted to SmartRig(TM) units before year end, all of which should command higher rates. Although the Company plans to continue the upgrade program over the following quarters, a handful of upgradable rigs in the northern regions are not committed at this point. Depending on customer demand, the $4 million per rig capital expenditures for some of these rigs could be deferred into 2018.
International adjusted EBITDA increased by $26 million to $135 million, compared to $109 million in the prior quarter. The improvement was driven by increases in rig activity and margins. A significant portion of this improvement was due to the absence of higher-than-usual costs and lost revenue in our largest market that impacted first quarter results. The Company expects the rig count to continue to increase in the fourth quarter.
Canada results were higher than normal for the seasonally low second quarter. The average rigs working during the second quarter were 12 as compared to 4 rigs during the second quarter of 2016. Additionally, average margins increased substantially by $1,151 per rig day, equating to $5,136 compared to $3,985 in the first quarter of 2017. The Company expects meaningful improvement relative to 2016.
Adjusted EBITDA for Rig Services, which consists of the Company's manufacturing, drilling technology, and other related services, increased substantially to $5.5 million compared with a loss of $2.1 million in the first quarter of 2017. This increase was driven by a large improvement in NDS operating margins, which delivered $7.6 million in adjusted EBITDA for the quarter, and a smaller but still large improvement in Canrig, the Company's manufacturing unit. The increasing penetration of NDS services at higher margins than in previous quarters is expected to continue improving quarterly results. Canrig is anticipated to be adjusted EBITDA positive during the second half of the year.
William Restrepo, Nabors Chief Financial Officer, stated, "Our results during the second quarter returned to more normal levels, while also benefiting from strong operational performance across our international markets, pricing improvements in the U.S. for all product lines, as well as continued volume improvements in Canrig and NDS. As anticipated, Lower 48 dayrates and margins inflected, while active international drilling rigs continued to increase from their low point at the end of last year. In a strong growth environment we managed to keep our net debt in check and are targeting to maintain the current levels for the end of the year. We expect capital expenditures to finish 2017 within our previously communicated $550 million to $600 million range. Finally, we continue to work towards our long-term target of $2.25 billion in net debt by 2020."
Mr. Petrello concluded, "I am pleased that our results came in ahead of our expectations. This quarter gave us a solid indication that we are on the right path towards our ultimate goal to be the performance driller of choice. We are building the most capable fit-for-purpose rig fleet in the industry, while integrating these rigs with the latest automated drilling technologies in our NDS portfolio. Additionally, we are in the process of deploying our revolutionary first quad drilling design rigs in the U.S. and we expect the iRacker(TM) automated tubular handling system to be deployed on multiple field trials during the second half of 2017.
"The positive momentum in the U.S. combined with our strong performance allowed us to deploy several rigs during the quarter. In the U.S. Drilling segment we reversed the negative trend in margins. Additionally we expect sequential margin increases going forward as a result of improved pricing and cost reductions, coupled with the deployment of incremental new builds and SmartRig(TM) upgrades. Internationally, our margins recovered from the material cost and lost revenue impact during the first quarter in one of our major markets. Finally I am excited with the opportunities presented by our joint venture with Saudi Aramco, officially named Sanad. We expect to commence operations within the next few months."
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 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 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. 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 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 Contact: Dennis A. Smith, Vice President of Corporate Development & Investor Relations, +1 281-775-8038 or Nick Swyka, Director of Corporate Development & Investor Relations, +1 281-775-2407. 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) 2017 2016 2017 2017 2016
---- ---- ---- ---- ----
Revenues and other income:
Operating revenues $631,355 $571,591 $562,550 $1,193,905 $1,169,162
Earnings (losses) from
unconsolidated affiliates - (54,769) 2 2 (221,920)
Investment income (loss) (886) 270 721 (165) 613
Total revenues and other
income 630,469 517,092 563,273 1,193,742 947,855
------- ------- ------- --------- -------
Costs and other deductions:
Direct costs 417,521 341,279 387,644 805,165 706,302
General and administrative
expenses 63,695 56,624 63,409 127,104 118,958
Research and engineering 11,343 8,180 11,757 23,100 16,342
Depreciation and amortization 208,090 218,913 203,672 411,762 434,731
Interest expense 54,688 45,237 56,518 111,206 90,967
Other, net 10,104 74,607 13,510 23,614 257,011
Total costs and other
deductions 765,441 744,840 736,510 1,501,951 1,624,311
------- ------- ------- --------- ---------
Income (loss) from continuing
operations before income
taxes (134,972) (227,748) (173,237) (308,209) (676,456)
-------- -------- -------- -------- --------
Income tax expense (benefit) (19,496) (41,183) (25,609) (45,105) (93,247)
------- ------- ------- ------- -------
Income (loss) from continuing
operations, net of tax (115,476) (186,565) (147,628) (263,104) (583,209)
Income (loss) from
discontinued operations, net
of tax (15,504) (984) (439) (15,943) (1,910)
------- ---- ---- ------- ------
Net income (loss) (130,980) (187,549) (148,067) (279,047) (585,119)
Less: Net (income) loss
attributable to
noncontrolling interest (1,971) 2,899 (917) (2,888) 2,175
Net income (loss) attributable
to Nabors $(132,951) $(184,650) $(148,984) $(281,935) $(582,944)
--------- --------- --------- --------- ---------
Amounts attributable to Nabors:
Net income (loss) from
continuing operations $(117,447) $(183,666) $(148,545) $(265,992) $(581,034)
Net income (loss) from
discontinued operations (15,504) (984) (439) (15,943) (1,910)
Net income (loss) attributable
to Nabors $(132,951) $(184,650) $(148,984) $(281,935) $(582,944)
--------- --------- --------- --------- ---------
Earnings (losses) per share:
Basic from continuing
operations $(.41) $(.65) $(.52) $(.93) $(2.06)
Basic from discontinued
operations (.05) - - (.06) (.01)
---- --- --- ---- ----
Basic $(.46) $(.65) $(.52) $(.99) $(2.07)
Diluted from continuing
operations $(.41) $(.65) $(.52) $(.93) $(2.06)
Diluted from discontinued
operations (.05) - - (.06) (.01)
---- --- --- ---- ----
Diluted $(.46) $(.65) $(.52) $(.99) $(2.07)
Weighted-average number of common shares outstanding:
Basic 278,916 276,550 277,781 278,348 276,201
------- ------- ------- ------- -------
Diluted 278,916 276,550 277,781 278,348 276,201
------- ------- ------- ------- -------
Adjusted EBITDA $138,796 $165,508 $99,740 $238,536 $327,560
======== ======== ======= ======== ========
Adjusted operating income
(loss) $(69,294) $(53,405) $(103,932) $(173,226) $(107,171)
======== ======== ========= ========= =========
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, March 31, December 31,
(In thousands) 2017 2017 2016
---- ---- ----
(Unaudited)
ASSETS
Current assets:
Cash and short-term
investments $232,043 $228,595 $295,202
Accounts receivable,
net 582,787 514,446 508,355
Assets held for sale 78,407 77,118 76,668
Other current assets 280,931 302,497 275,614
------- ------- -------
Total current assets 1,174,168 1,122,656 1,155,839
Property, plant and
equipment, net 6,142,216 6,218,699 6,267,583
Goodwill 167,246 166,999 166,917
Other long-term
assets 608,828 586,958 596,676
Total assets $8,092,458 $8,095,312 $8,187,015
========== ========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current debt $124 $313 $297
Other current
liabilities 876,443 771,336 821,637
------- ------- -------
Total current
liabilities 876,567 771,649 821,934
Long-term debt 3,740,248 3,661,665 3,578,335
Other long-term
liabilities 402,865 475,604 531,951
------- ------- -------
Total liabilities 5,019,680 4,908,918 4,932,220
Equity:
Shareholders' equity 3,049,235 3,177,948 3,247,025
Noncontrolling
interest 23,543 8,446 7,770
------ ----- -----
Total equity 3,072,778 3,186,394 3,254,795
Total liabilities
and equity $8,092,458 $8,095,312 $8,187,015
========== ========== ==========
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) 2017 2016 2017 2017 2016
---- ---- ---- ---- ----
Operating revenues:
Drilling & Rig Services:
U.S. $187,344 $140,342 $161,934 $349,278 $289,018
Canada 17,121 6,617 27,808 44,929 24,111
International 380,338 401,024 338,223 718,561 802,079
Rig Services (1) 93,014 39,248 71,441 164,455 93,101
------ ------ ------ ------- ------
Subtotal Drilling & Rig
Services 677,817 587,231 599,406 1,277,223 1,208,309
Other reconciling items
(2) (46,462) (15,640) (36,856) (83,318) (39,147)
------- ------- ------- ------- -------
Total operating revenues $631,355 $571,591 $562,550 $1,193,905 $1,169,162
-------- -------- -------- ---------- ----------
Adjusted EBITDA: (3)
Drilling & Rig Services:
U.S. $37,791 $52,878 $26,629 $64,420 $104,113
Canada 4,177 360 6,335 10,512 2,482
International 134,784 150,618 108,656 243,440 298,927
Rig Services (1) 5,472 (10,433) (2,107) 3,365 (11,914)
----- ------- ------ ----- -------
Subtotal Drilling & Rig
Services 182,224 193,423 139,513 321,737 393,608
Other reconciling items
(4) (43,428) (27,915) (39,773) (83,201) (66,048)
------- ------- ------- ------- -------
Total adjusted EBITDA $138,796 $165,508 $99,740 $238,536 $327,560
Adjusted operating income
(loss): (5)
Drilling & Rig Services:
U.S. $(56,079) $(48,328) $(63,182) $(119,261) $(95,887)
Canada (5,014) (10,831) (4,011) (9,025) (18,109)
International 36,174 53,859 11,974 48,148 100,731
Rig Services (1) (1,268) (19,657) (9,109) (10,377) (30,301)
------ ------- ------ ------- -------
Subtotal Drilling & Rig
Services (26,187) (24,957) (64,328) (90,515) (43,566)
Other reconciling items
(4) (43,107) (28,448) (39,604) (82,711) (63,605)
------- ------- ------- ------- -------
Total adjusted operating
income (loss) $(69,294) $(53,405) $(103,932) $(173,226) $(107,171)
Rig activity:
Average Rigs Working: (6)
U.S. 100.6 53.7 88.8 94.7 59.3
Canada 12.4 4.2 22.0 17.1 8.3
International 92.7 101.2 89.8 91.3 105.9
Total average rigs
working 205.7 159.1 200.6 203.1 173.5
(1) Includes our other services comprised
of our manufacturing, directional
drilling and complementary services.
(2) Represents the elimination of inter-
segment transactions.
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 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. In
addition, 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
(3) Income Taxes".
(4) Represents the elimination of inter-
segment transactions and unallocated
corporate expenses.
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 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. In
addition, 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
(5) Income Taxes".
Represents a measure of the number of
rigs operating during a given
period. For example, one rig
operating 45 days during a quarter
represents 0.5 average rigs working
for the quarter. On an annual
period, one rig operating 182.5 days
represents 0.5 average rigs working
(6) 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) 2017 2016 2017 2017 2016
---- ---- ---- ---- ----
Adjusted EBITDA $138,796 $165,508 $99,740 $238,536 $327,560
Depreciation and
amortization (208,090) (218,913) (203,672) (411,762) (434,731)
Adjusted operating
income (loss) (69,294) (53,405) (103,932) (173,226) (107,171)
------- ------- -------- -------- --------
Earnings (losses) from
unconsolidated
affiliates - (54,769) 2 2 (221,920)
Investment income
(loss) (886) 270 721 (165) 613
Interest expense (54,688) (45,237) (56,518) (111,206) (90,967)
Other, net (10,104) (74,607) (13,510) (23,614) (257,011)
Income (loss) from
continuing operations
before income taxes $(134,972) $(227,748) $(173,237) $(308,209) $(676,456)
========= ========= ========= ========= =========
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF NET DEBT TO TOTAL DEBT
June 30, March 31, December 31,
(In thousands) 2017 2017 2016
---- ---- ----
(Unaudited)
Current debt $124 $313 $297
Long-term debt 3,740,248 3,661,665 3,578,335
--------- --------- ---------
Total Debt 3,740,372 3,661,978 3,578,632
Less: Cash and short-
term investments 232,043 228,595 295,202
Net Debt $3,508,329 $3,433,383 $3,283,430
========== ========== ==========
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SOURCE Nabors Industries Ltd.
