Nabors Announces Second Quarter 2019 Results
HAMILTON, Bermuda, July 29, 2019 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors" or the "Company") (NYSE: NBR) today reported second quarter 2019 operating revenue of $771 million, compared to operating revenue of $800 million in the first quarter. Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $208 million, or $0.61 per share, compared to a loss of $122 million, or $0.36 per share, in the prior quarter. Results for the second quarter included net goodwill and intangible asset impairments of $99 million, or $0.29 per share, which were partially offset by a non-recurring tax gain of $31 million, or $0.09 per share.
Second-quarter consolidated adjusted EBITDA was $198.4 million, compared to $197.0 million in the previous quarter. Substantial sequential improvements in the Lower 48, Rig Technologies and, to a lesser extent International, more than offset lower seasonal activity in Canada, U.S. Offshore and Alaska. Adjusted operating income for the Company was a loss of $19.9 million in the second quarter, compared to a loss of $13.4 million in the first quarter.
Anthony G. Petrello, Nabors Chairman, CEO and President, commented, "For our industry, the quarter was marked by continued gradual softening of drilling activity in the lower 48 and a more positive outlook internationally. We are seeing the same broad market trends and expect they will continue throughout the third quarter. Discussions with our customers indicate a modest temporary reduction in our Lower 48 results, with improvement in our International second-half results.
"Contrary to the drop in lower 48 industry rig count, we grew our second quarter rig count by three rigs to nearly 115, as five upgraded rigs were deployed during the quarter. We also modestly improved daily margins. Our Canada rig count averaged 7.4 rigs with the seasonal downturn, an 8.9 rig reduction compared to the first quarter. We also anticipate a third quarter improvement in Canada as seasonal activity recovers. Our rig count in Canada is expected to approach 15 rigs in the fourth quarter.
"Internationally, we have not yet benefitted from the increased rig demand, as our average rig count fell by one. Two of our rigs in Argentina, which were extended for a multiyear term, were temporarily idled due to mandatory recertifications before commencing the new contract term. We expect our average International rig count to remain flat sequentially, with the potential for a three rig increase late in the third quarter, benefitting the fourth quarter.
Mr. Petrello continued, "Our Rig Technologies and Drilling Solutions segments each reported sequential progress. Rig Technologies posted a meaningful improvement with increased aftermarket content, a larger proportion of third-party sales, lower costs and initial revenues in robotics. Drilling Solutions grew despite the loss of some revenue on third-party rigs, as those rigs shut down. Meanwhile, we continue to see greater penetration of our automation and integration initiatives, as we secured additional jobs for our Navigator(TM) and ROCKit(® )Pilot directional drilling automation systems. Today these systems are working for seven customers in four basins. Customer adoption is widening and we expect increasing financial contributions in coming quarters."
Consolidated and Segment Results
The U.S. Drilling segment reported essentially flat adjusted EBITDA of $125 million. Improvement in the Lower 48 operation was offset by seasonal declines in activity in Alaska and U.S. Offshore. During the quarter, utilization of the Company's high-specification rigs in the Lower 48 was approximately 95%. Gross margin increased modestly to $10,220 per day and is expected to increase slightly during the third quarter. This segment's rig count currently stands at 121, with 112 rigs working in the Lower 48.
International Drilling adjusted EBITDA increased sequentially by 1%, to $87 million. Quarterly average rig count declined by one to 89, while the average margin per day was essentially unchanged, at approximately $12,600. During the third quarter, the Company expects adjusted EBITDA to increase by $5 to $7 million, reflecting improved operational performance in various markets and cost reductions.
Canada Drilling operations were negatively impacted by the seasonal downturn in addition to the relatively weak current market conditions. Adjusted EBITDA of $1.1 million was down from $7.4 million in the first quarter. The average daily gross margin decreased sequentially to slightly below $3,800.
In Drilling Solutions, adjusted EBITDA of $22.5 million was $1.4 million higher than the first quarter, despite a decreased overall industry rig count in the lower 48. Drilling performance software revenue and margins continued to strengthen, with increased market penetration of drilling automation systems. Results in wellbore placement and PetroMar also improved.
In the Rig Technologies segment, second quarter adjusted EBITDA improved to $3.2 million from an adjusted EBITDA loss of $2.3 million in the first quarter. The results reflect higher margins in Canrig, reduced costs related to the commercialization of the rotary steerable tool, and initial revenue and lower costs in robotic drilling systems.
Capital Expenditures and Liquidity
Capital expenditures for the quarter were higher than expected at $131 million reflecting Lower 48 rig upgrade deployments, which were ahead of schedule, bringing year-to-date capital spending to approximately $275 million. Capital expenditures for the remainder of the year should decline significantly with no additional Lower 48 rig upgrades scheduled and International expenditures for several rig deployments winding down.
William Restrepo, Nabors Chief Financial Officer, stated, "Free cash flow after dividends was healthy at $82 million, as compared to $100 million consumed in the first quarter. In the quarter we repurchased $305 million of our 2020 senior notes, which cost us approximately $7 million in premiums, prepayment of accrued interest and transaction fees. Quarterly capital expenditures were $131 million, compared to $146 million in the first quarter. In the third quarter, we are targeting positive free cash flow after dividends, despite semiannual interest payments on our outstanding senior notes. We continue to target $400 million in capital spending for the full year and expect to deliver in excess of $200 million in net debt reduction during the full year 2019."
Mr. Petrello concluded, "Despite ongoing volatility in oil prices, and the resultant caution on the part of our U.S. customer base, we continue to believe we will see improving results over the balance of this year. This view is based on limited downside in the Lower 48, an improving outlook in certain international markets and Drilling Solutions, as well as seasonal recoveries in Canada, Alaska and Offshore.
"In the U.S., our strategy of deploying the highest-specification rigs to the industry's most demanding customers has been successful, as demonstrated by our Lower 48 results. However, we also believe the current market conditions are likely to result in a temporary decrease in utilization in our Lower 48 operations during the third quarter. Nonetheless, we are encouraged by customer inquiries regarding the availability of our higher-spec rigs to support their drilling plans for early 2020, which we expect to benefit our fourth quarter 2019 results.
"On a consolidated basis we expect our adjusted EBITDA to continue improving over the following quarters."
About Nabors
Nabors (NYSE: NBR) owns and operates one of the world's largest land-based drilling rig fleets and provides 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 operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to make. Net debt is calculated as total debt minus the sum of cash, cash equivalents, and short-term investments. Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities and cash paid for dividends. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base and pay dividends. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. 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. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA, adjusted operating income (loss), net debt, and free cash flow after dividends, 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. Reconciliations of consolidated adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes, net debt to total debt, and free cash flow after dividends to cash flow provided by operations , 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, Senior Vice President of Corporate Development & Investor Relations, +1 281-775-8038 or William C. 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 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) 2019 2018 2019 2019 2018
---
Revenues and other income:
Operating revenues $771,406 $761,920 $799,640 $1,571,046 $1,496,114
Earnings (losses) from
unconsolidated affiliates (1) (5) (5) 1
Investment income (loss) 469 (3,164) 9,677 10,146 (2,699)
Total revenues and other income 771,875 758,755 809,312 1,581,187 1,493,416
---
Costs and other deductions:
Direct costs 496,664 493,975 520,957 1,017,621 969,378
General and administrative expenses 64,415 67,823 68,167 132,582 142,394
Research and engineering 11,920 12,439 13,520 25,440 28,245
Depreciation and amortization 218,319 218,262 210,391 428,710 431,710
Interest expense 51,491 60,592 52,352 103,843 121,978
Impairments and other charges 102,570 69,620 (2,667) 99,903 76,664
Other, net 7,899 7,981 20,169 28,068 15,026
Total costs and other deductions 953,278 930,692 882,889 1,836,167 1,785,395
---
Income (loss) from continuing
operations before income taxes (181,403) (171,937) (73,577) (254,980) (291,979)
Income tax expense (benefit) 11,398 23,278 29,799 41,197 46,823
---
Income (loss) from continuing
operations, net of tax (192,801) (195,215) (103,376) (296,177) (338,802)
Income (loss) from discontinued
operations, net of tax (34) (584) (157) (191) (659)
---
Net income (loss) (192,835) (195,799) (103,533) (296,368) (339,461)
Less: Net (income) loss
attributable to noncontrolling
interest (10,729) (2,953) (14,176) (24,905) (3,492)
Net income (loss) attributable to
Nabors $(203,564) $(198,752) $(117,709) $(321,273) $(342,953)
Less: Preferred stock dividend $(4,312) $(3,680) $(4,313) $(8,625) $(3,680)
Net income (loss) attributable to
Nabors common shareholders $(207,876) $(202,432) $(122,022) $(329,898) $(346,633)
Amounts attributable to Nabors common shareholders:
Net income (loss) from continuing
operations $(207,842) $(201,848) $(121,865) $(329,707) $(345,974)
Net income (loss) from discontinued
operations (34) (584) (157) (191) (659)
Net income (loss) attributable to
Nabors common shareholders $(207,876) $(202,432) $(122,022) $(329,898) $(346,633)
Earnings (losses) per share:
Basic from continuing operations $(0.61) $(0.61) $(0.36) $(0.97) $(1.08)
Basic from discontinued operations -
Total Basic $(0.61) $(0.61) $(0.36) $(0.97) $(1.08)
Diluted from continuing operations $(0.61) $(0.61) $(0.36) $(0.97) $(1.08)
Diluted from discontinued
operations -
Total Diluted $(0.61) $(0.61) $(0.36) $(0.97) $(1.08)
Weighted-average number of common shares outstanding:
Basic 351,543 328,372 350,764 351,154 318,580
---
Diluted 351,543 328,372 350,764 351,154 318,580
---
Adjusted EBITDA $198,407 $187,683 $196,996 $395,403 $356,097
Adjusted operating income (loss) $(19,912) $(30,579) $(13,395) $(33,307) $(75,613)
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, March 31,
December 31,
(In thousands) 2019 2019 2018
(Unaudited)
ASSETS
Current assets:
Cash and short-term investments $395,716 $469,717 $481,802
Accounts receivable, net 737,353 743,528 756,320
Assets held for sale 8,004 12,330 12,250
Other current assets 325,606 330,328 343,191
Total current assets 1,466,679 1,555,903 1,593,563
Property, plant and equipment, net 5,301,252 5,399,514 5,467,870
Goodwill 90,645 184,104 183,914
Other long-term assets 655,927 634,163 608,597
Total assets $7,514,503 $7,773,684 $7,853,944
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt $790 $850 $561
Other current liabilities 771,377 734,952 831,516
Total current liabilities 772,167 735,802 832,077
Long-term debt 3,550,577 3,677,580 3,585,884
Other long-term liabilities 321,576 300,340 280,796
Total liabilities 4,644,320 4,713,722 4,698,757
Redeemable noncontrolling interest in subsidiary 415,042 409,923 404,861
Equity:
Shareholders' equity 2,381,514 2,586,335 2,700,850
Noncontrolling interest 73,627 63,704 49,476
Total equity 2,455,141 2,650,039 2,750,326
Total liabilities and equity $7,514,503 $7,773,684 $7,853,944
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) 2019 2018 2019 2019 2018
---
Operating revenues:
U.S. Drilling $323,402 $264,395 $320,209 $643,611 $505,397
Canada Drilling 11,389 17,442 25,315 36,704 49,329
International
Drilling 326,905 377,986 337,256 664,161 746,831
Drilling Solutions 64,583 59,859 65,422 130,005 122,507
Rig Technologies (1) 72,751 81,321 71,753 144,504 145,990
Other reconciling
items (2) (27,624) (39,083) (20,315) (47,939) (73,940)
---
Total operating
revenues $771,406 $761,920 $799,640 $1,571,046 $1,496,114
---
Adjusted EBITDA: (3)
U.S. Drilling $124,924 $86,923 $125,005 $249,929 $159,990
Canada Drilling 1,069 4,963 7,446 8,515 14,262
International
Drilling 86,767 122,631 85,844 172,611 246,621
Drilling Solutions 22,461 14,765 21,046 43,507 29,493
Rig Technologies (1) 3,160 446 (2,296) 864 (8,238)
Other reconciling
items (4) (39,974) (42,045) (40,049) (80,023) (86,031)
---
Total adjusted
EBITDA $198,407 $187,683 $196,996 $395,403 $356,097
Adjusted operating income (loss): (5)
U.S. Drilling $20,392 $(13,107) $24,683 $45,075 $(32,853)
Canada Drilling (5,537) (4,608) (59) (5,596) (5,200)
International
Drilling (6,884) 24,486 (5,637) (12,521) 49,022
Drilling Solutions 13,793 7,546 12,855 26,648 16,267
Rig Technologies (1) 496 (3,433) (5,148) (4,652) (16,409)
Other reconciling
items (4) (42,172) (41,463) (40,089) (82,261) (86,440)
---
Total adjusted
operating income
(loss) $(19,912) $(30,579) $(13,395) $(33,307) $(75,613)
Rig activity:
Average Rigs Working: (6)
U.S. Drilling 122.2 112.1 120.9 121.5 112.0
Canada Drilling 7.4 10.2 16.3 11.8 15.6
International
Drilling 88.6 93.1 89.7 89.1 93.8
Total average rigs
working 218.2 215.4 226.9 222.4 221.4
---
(1) Includes our oilfield equipment
manufacturing, automated systems,
and downhole tools.
(2) Represents the elimination of inter-
segment transactions.
(3) Adjusted EBITDA represents income
(loss) from continuing operations
before income taxes, interest
expense, depreciation and
amortization, earnings (losses) from
unconsolidated affiliates,
investment income (loss),
impairments and other charges and
other, net. 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)
represents income (loss) from
continuing operations before income
taxes, interest expense, earnings
(losses) from unconsolidated
affiliates, investment income
(loss), impairments and other
charges and other, net. 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) 2019 2018 2019 2019 2018
---
Adjusted EBITDA $198,407 $187,683 $196,996 $395,403 $356,097
Depreciation and
amortization (218,319) (218,262) (210,391) (428,710) (431,710)
Adjusted operating
income (loss) (19,912) (30,579) (13,395) (33,307) (75,613)
---
Earnings (losses) from
unconsolidated
affiliates (1) (5) (5) 1
Investment income
(loss) 469 (3,164) 9,677 10,146 (2,699)
Interest expense (51,491) (60,592) (52,352) (103,843) (121,978)
Impairments and other
charges (102,570) (69,620) 2,667 (99,903) (76,664)
Other, net (7,899) (7,981) (20,169) (28,068) (15,026)
Income (loss) from
continuing operations
before income taxes $(181,403) $(171,937) $(73,577) $(254,980) $(291,979)
---
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF NET DEBT TO TOTAL DEBT
June 30, March 31,
December 31,
(In thousands) 2019 2019 2018
(Unaudited)
Current portion of debt $790 $850 $561
Long-term debt 3,550,577 3,677,580 3,585,884
Total Debt 3,551,367 3,678,430 3,586,445
Less: Cash and short-term investments 395,716 469,717 481,802
Net Debt $3,155,651 $3,208,713 $3,104,643
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF FREE CASH FLOW AFTER DIVIDENDS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
Three Months Ended
Six Months Ended
June 30, March 31,
June 30,
---
(In thousands) 2019 2019 2019
Net cash provided by
operating activities $203,231 $69,854 $273,085
Less: Net cash used
for investing
activities (113,760) (144,444) (258,204)
Less: Dividends to
common and preferred
shareholders (7,940) (25,765) (33,705)
Free cash flow after
dividends $81,531 $(100,355) $(18,824)
---
Free cash flow after dividends
represents net cash provided by
operating activities less cash
used for investing activities
and cash paid for dividends.
Free cash flow is an indicator
of our ability to generate cash
flow after required spending to
maintain or expand our asset
base and pay dividends.
Management believes that this
non-GAAP measure is useful
information to investors when
comparing our cash flows with
the cash flows of other
companies. This non-GAAP
measure has limitations and
therefore should not be used in
isolation or as a substitute for
the amounts reported in
accordance with GAAP. However,
management evaluates the
performance of the consolidated
Company based on several
criteria, including free cash
flow after dividends, because it
believes that these financial
measures accurately reflect the
Company's ongoing profitability
and performance.
View original content:http://www.prnewswire.com/news-releases/nabors-announces-second-quarter-2019-results-300892710.html
SOURCE Nabors Industries Ltd.
