UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30,March 31, 20212022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-32657
NABORS INDUSTRIES LTD.
(Exact name of registrant as specified in its charter)
| | |
Bermuda | | 98-0363970 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
Crown House
Second Floor
4 Par-la-Ville Road
Hamilton, HM08
Bermuda
(Address of principal executive office)
(441) 292-1510
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common shares, $.05 par value per share | NBR | NYSE |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | |
Large Accelerated Filer | | Accelerated Filer |
| | |
Non-accelerated Filer ☐ | | Smaller reporting company ☐ |
| Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of common shares, par value $.05 per share, outstanding as of October 31, 2021April 29, 2022 was 8,241,094,9,411,918, excluding 1,090,003 common shares held by our subsidiaries, or 9,331,09710,501,921 in the aggregate.
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
Index
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PART I FINANCIAL INFORMATION | ||
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| 5 | |
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| 6 | |
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| 7 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | March 31, | | December 31, | | ||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
| | (In thousands, except per |
| | (In thousands, except per |
| ||||||||
| | share amounts) |
| | share amounts) |
| ||||||||
ASSETS | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 771,878 | | $ | 472,246 | | | $ | 394,028 | | $ | 991,471 | |
Short-term investments | |
| 6 | |
| 9,500 | | |
| 11 | |
| 17 | |
Accounts receivable, net of allowance of $69,456 and $69,807, respectively | |
| 282,726 | |
| 362,977 | | |||||||
Accounts receivable, net of allowance of $90,321 and $67,292, respectively | |
| 297,209 | |
| 287,572 | | |||||||
Inventory, net | |
| 136,992 | |
| 160,585 | | |
| 132,126 | |
| 126,448 | |
Assets held for sale | |
| 16,785 | |
| 16,562 | | |
| 16,582 | |
| 16,561 | |
Other current assets | |
| 114,240 | |
| 109,595 | | |
| 104,112 | |
| 95,740 | |
Total current assets | |
| 1,322,627 | |
| 1,131,465 | | |
| 944,068 | |
| 1,517,809 | |
Property, plant and equipment, net | |
| 3,443,737 | |
| 3,985,707 | | |
| 3,245,574 | |
| 3,332,498 | |
Restricted cash held in trust | |
| 281,549 | |
| 281,523 | | |||||||
Deferred income taxes | |
| 256,679 | |
| 247,171 | | |
| 256,543 | |
| 258,631 | |
Other long-term assets | |
| 151,783 | |
| 139,085 | | |
| 129,432 | |
| 134,903 | |
Total assets (1) | | $ | 5,174,826 | | $ | 5,503,428 | | | $ | 4,857,166 | | $ | 5,525,364 | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | |
Trade accounts payable | | $ | 251,740 | | $ | 220,922 | | | $ | 278,878 | | $ | 253,748 | |
Accrued liabilities | | | 235,356 | |
| 276,085 | | | | 209,910 | |
| 247,171 | |
Income taxes payable | |
| 23,056 | |
| 10,157 | | |
| 19,327 | |
| 18,887 | |
Current lease liabilities | |
| 5,936 | |
| 8,305 | | |
| 5,330 | |
| 5,422 | |
Total current liabilities | |
| 516,088 | |
| 515,469 | | |
| 513,445 | |
| 525,228 | |
Long-term debt | |
| 3,075,520 | |
| 2,968,701 | | |
| 2,610,092 | |
| 3,262,795 | |
Other long-term liabilities | |
| 346,327 | |
| 318,034 | | |
| 372,592 | |
| 340,347 | |
Deferred income taxes | |
| 2,215 | |
| 1,576 | | |
| 2,478 | |
| 2,773 | |
Total liabilities (1) | |
| 3,940,150 | |
| 3,803,780 | | |
| 3,498,607 | |
| 4,131,143 | |
Commitments and contingencies (Note 8) | | | | | | | | |||||||
Redeemable noncontrolling interest in subsidiary (Note 3) | | | 400,853 | |
| 442,840 | | |||||||
Commitments and contingencies (Note 15) | | | | | | | | |||||||
Redeemable noncontrolling interest in subsidiary | | | 677,829 | |
| 675,283 | | |||||||
| | | | | | | | | | | | | | |
Shareholders’ equity: | | | | | | | | | | | | | | |
Preferred shares, par value $0.001 per share: | | | | | | | | |||||||
Series A 6% Cumulative Mandatory Convertible; $50 per share liquidation preference; outstanding 0 and 4,870, respectively | |
| — | |
| 5 | | |||||||
Common shares, par value $0.05 per share: | | | | | | | | | | | | | | |
Authorized common shares 32,000; issued 9,332 and 8,383, respectively | |
| 466 | |
| 419 | | |||||||
Authorized common shares 32,000; issued 10,475 and 9,295, respectively | |
| 523 | |
| 466 | | |||||||
Capital in excess of par value | |
| 3,450,408 | |
| 3,423,935 | | |
| 3,593,355 | |
| 3,454,563 | |
Accumulated other comprehensive income (loss) | |
| (10,872) | |
| (11,124) | | |
| (9,298) | |
| (10,634) | |
Retained earnings (accumulated deficit) | |
| (1,415,230) | |
| (946,100) | | |
| (1,725,213) | |
| (1,537,988) | |
Less: treasury shares, at cost, 1,090 and 1,090 common shares, respectively | |
| (1,315,751) | |
| (1,315,751) | | |
| (1,315,751) | |
| (1,315,751) | |
Total shareholders’ equity | |
| 709,021 | |
| 1,151,384 | | |
| 543,616 | |
| 590,656 | |
Noncontrolling interest | |
| 124,802 | |
| 105,424 | | |
| 137,114 | |
| 128,282 | |
Total equity | |
| 833,823 | |
| 1,256,808 | | |
| 680,730 | |
| 718,938 | |
Total liabilities and equity | | $ | 5,174,826 | | $ | 5,503,428 | | | $ | 4,857,166 | | $ | 5,525,364 | |
(1) | The condensed consolidated balance sheet as of |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | ||||||||||||
| |
| September 30, |
| September 30, | | |
| March 31, | | ||||||||||||
| | | 2021 | | 2020 | | 2021 | | 2020 | | | | 2022 | | 2021 | | ||||||
| (In thousands, except per share amounts) | (In thousands, except per share amounts) | ||||||||||||||||||||
Revenues and other income: | | | | | | | | | | | | | | | | | | | | | | |
Operating revenues | | | $ | 524,165 | | $ | 438,352 | | $ | 1,474,009 | | $ | 1,690,647 | | | | $ | 568,539 | | $ | 460,511 | |
Investment income (loss) | | |
| 200 | |
| (742) | |
| 1,401 | |
| (1,904) | | | |
| 163 | |
| 1,263 | |
Total revenues and other income | | | | 524,365 | | | 437,610 | | | 1,475,410 | | | 1,688,743 | | | | | 568,702 | | | 461,774 | |
| | | | | | | | | | | | | | | | | | | | | | |
Costs and other deductions: | | | | | | | | | | | | | | | | | | | | | | |
Direct costs | | | | 336,538 | | | 270,397 | | | 939,658 | | | 1,058,794 | | | | | 372,712 | | | 290,654 | |
General and administrative expenses | | | | 52,897 | | | 46,168 | | | 159,137 | | | 149,796 | | | | | 53,639 | | | 54,660 | |
Research and engineering | | |
| 9,498 | |
| 7,565 | |
| 24,930 | |
| 26,279 | | | |
| 11,678 | |
| 7,467 | |
Depreciation and amortization | | |
| 173,375 | |
| 206,862 | |
| 525,426 | |
| 645,045 | | | |
| 164,359 | |
| 177,276 | |
Interest expense | | | | 42,217 | | | 52,403 | | | 126,906 | | | 158,331 | | | | | 46,910 | | | 42,975 | |
Impairments and other charges | | |
| 3,068 | |
| 5,017 | |
| 65,419 | |
| 339,303 | | ||||||||
Other, net | | | | 19,690 | | | (425) | | | 31,140 | | | (48,330) | | | | | 80,401 | | | 7,346 | |
Total costs and other deductions | | | | 637,283 | | | 587,987 | | | 1,872,616 | | | 2,329,218 | | | | | 729,699 | | | 580,378 | |
Income (loss) from continuing operations before income taxes | | |
| (112,918) | |
| (150,377) | |
| (397,206) | |
| (640,475) | | | |
| (160,997) | |
| (118,604) | |
Income tax expense (benefit): | | | | | | | | | | | | | | | | | | | | | | |
Current | | |
| 8,440 | |
| 1,450 | |
| 46,538 | |
| (6,089) | | | |
| 9,950 | |
| 10,903 | |
Deferred | | |
| (5,656) | |
| (5,145) | |
| (9,310) | |
| 24,533 | | | |
| 3,721 | |
| (1,178) | |
Total income tax expense (benefit) | | |
| 2,784 | |
| (3,695) | |
| 37,228 | |
| 18,444 | | | |
| 13,671 | |
| 9,725 | |
Income (loss) from continuing operations, net of tax | | |
| (115,702) | |
| (146,682) | |
| (434,434) | |
| (658,919) | | | |
| (174,668) | |
| (128,329) | |
Income (loss) from discontinued operations, net of tax | | |
| (20) | |
| 22 | |
| 7 | |
| (48) | | | |
| — | |
| 19 | |
Net income (loss) | | |
| (115,722) | |
| (146,660) | |
| (434,427) | |
| (658,967) | | | |
| (174,668) | |
| (128,310) | |
Less: Net (income) loss attributable to noncontrolling interest | | |
| (6,778) | |
| (10,805) | |
| (21,168) | |
| (38,437) | | | |
| (9,828) | |
| (8,776) | |
Net income (loss) attributable to Nabors | | | | (122,500) | | | (157,465) | | | (455,595) | | | (697,404) | | | | | (184,496) | | | (137,086) | |
Less: Preferred stock dividend | | |
| — | |
| (3,653) | |
| (3,653) | |
| (10,958) | | | |
| — | |
| (3,653) | |
Net income (loss) attributable to Nabors common shareholders | | | $ | (122,500) | | $ | (161,118) | | $ | (459,248) | | $ | (708,362) | | | | $ | (184,496) | | $ | (140,739) | |
| | | | | | | | | | | | | | | | | | | | | | |
Amounts attributable to Nabors common shareholders: | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) from continuing operations | | | $ | (122,480) | | $ | (161,140) | | $ | (459,255) | | $ | (708,314) | | | | $ | (184,496) | | $ | (140,758) | |
Net income (loss) from discontinued operations | | | | (20) | | | 22 | | | 7 | | | (48) | | | | | — | | | 19 | |
Net income (loss) attributable to Nabors common shareholders | | | $ | (122,500) | | $ | (161,118) | | $ | (459,248) | | $ | (708,362) | | | | $ | (184,496) | | $ | (140,739) | |
| | | | | | | | | | | | | | | | | | | | | | |
Earnings (losses) per share: | | | | | | | | | | | | | | | | | | | | | | |
Basic from continuing operations | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.25) | | | | $ | (22.51) | | $ | (20.16) | |
Basic from discontinued operations | | |
| — | |
| — | |
| — | |
| (0.01) | | | |
| — | |
| — | |
Total Basic | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.26) | | | | $ | (22.51) | | $ | (20.16) | |
Diluted from continuing operations | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.25) | | | | $ | (22.51) | | $ | (20.16) | |
Diluted from discontinued operations | | |
| — | |
| — | |
| — | |
| (0.01) | | | |
| — | |
| — | |
Total Diluted | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.26) | | | | $ | (22.51) | | $ | (20.16) | |
Weighted-average number of common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | |
Basic | | |
| 7,907 | |
| 7,064 | |
| 7,490 | |
| 7,056 | | | |
| 8,311 | |
| 7,102 | |
Diluted | | |
| 7,907 | |
| 7,064 | |
| 7,490 | |
| 7,056 | | | |
| 8,311 | |
| 7,102 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | |
| | | Three Months Ended | |
| ||||||||||||
| |
| September 30, |
| September 30, | |
| |
| March 31, | |
| ||||||||||||
| | | 2021 | | 2020 | | 2021 | | 2020 | | | | | 2022 | | 2021 | | | ||||||
| (In thousands) |
| (In thousands) |
| ||||||||||||||||||||
Net income (loss) attributable to Nabors | | | $ | (122,500) | | $ | (157,465) | | $ | (455,595) | | $ | (697,404) | | | | | $ | (184,496) | | $ | (137,086) | | |
Other comprehensive income (loss), before tax: | | | | | | | | | | | | | | | | | | | | | | | | |
Translation adjustment attributable to Nabors | | | | (2,288) | | | 3,665 | | | 2,032 | | | (7,029) | | | | | | (132) | | | 2,228 | | |
Pension liability amortization and adjustment | | |
| 52 | |
| 52 | |
| (1,744) | |
| 156 | | | | |
| 1,480 | |
| (1,848) | | |
Unrealized gains (losses) and amortization on cash flow hedges | | |
| — | |
| (124) | |
| — | |
| 160 | | | |||||||||
Other comprehensive income (loss), before tax | | |
| (2,236) | |
| 3,593 | |
| 288 | |
| (6,713) | | | | |
| 1,348 | |
| 380 | | |
Income tax expense (benefit) related to items of other comprehensive income (loss) | | |
| 12 | |
| 35 | |
| 36 | |
| 129 | | | | |
| 12 | |
| 12 | | |
Other comprehensive income (loss), net of tax | | |
| (2,248) | |
| 3,558 | |
| 252 | |
| (6,842) | | | | |
| 1,336 | |
| 368 | | |
Comprehensive income (loss) attributable to Nabors | | |
| (124,748) | |
| (153,907) | |
| (455,343) | |
| (704,246) | | | | |
| (183,160) | |
| (136,718) | | |
Comprehensive income (loss) attributable to noncontrolling interest | | |
| 6,778 | |
| 10,805 | |
| 21,168 | |
| 38,437 | | | | |
| 9,828 | |
| 8,776 | | |
Comprehensive income (loss) | | | $ | (117,970) | | $ | (143,102) | | $ | (434,175) | | $ | (665,809) | | | | | $ | (173,332) | | $ | (127,942) | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | |
| | Nine Months Ended September 30, | | ||||
|
| 2021 |
| 2020 | | ||
| | (In thousands) | | ||||
Cash flows from operating activities: | | | | | | | |
Net income (loss) | | $ | (434,427) | | $ | (658,967) | |
Adjustments to net income (loss): | | | | | | | |
Depreciation and amortization | |
| 525,427 | |
| 645,045 | |
Deferred income tax expense (benefit) | |
| (9,305) | |
| 24,535 | |
Impairments and other charges | |
| 72,898 | |
| 301,619 | |
Amortization of debt discount and deferred financing costs | | | 15,846 | |
| 24,347 | |
Losses (gains) on debt buyback | |
| (10,706) | |
| (65,848) | |
Losses (gains) on long-lived assets, net | |
| 17,299 | |
| 5,754 | |
Losses (gains) on investments, net | |
| (767) | |
| 5,653 | |
Provision (recovery) of bad debt | | | (350) | |
| 9,729 | |
Share-based compensation | |
| 15,207 | |
| 20,170 | |
Foreign currency transaction losses (gains), net | |
| 3,391 | |
| 11,404 | |
Noncontrolling interest | | | (21,168) | |
| (38,437) | |
Other | |
| 737 | |
| 257 | |
Changes in operating assets and liabilities, net of effects from acquisitions: | | | | | | | |
Accounts receivable | |
| 74,873 | |
| 90,757 | |
Inventory | |
| 21,137 | |
| 11,111 | |
Other current assets | |
| (6,060) | |
| 12,510 | |
Other long-term assets | |
| 3,721 | |
| 22,907 | |
Trade accounts payable and accrued liabilities | |
| 8,485 | |
| (159,621) | |
Income taxes payable | |
| 12,622 | |
| 2,393 | |
Other long-term liabilities | |
| 37,623 | |
| (17,412) | |
Net cash provided by (used for) operating activities | |
| 326,483 | |
| 247,906 | |
Cash flows from investing activities: | | | | | | | |
Purchases of investments | |
| (14,041) | |
| (30) | |
Sales and maturities of investments | |
| 11,371 | |
| 2,043 | |
Purchase of intangible assets | |
| (3,600) | |
| — | |
Capital expenditures | |
| (179,902) | |
| (153,128) | |
Proceeds from sales of assets and insurance claims | |
| 121,678 | |
| 21,773 | |
Other | |
| (594) | |
| — | |
Net cash (used for) provided by investing activities | |
| (65,088) | |
| (129,342) | |
Cash flows from financing activities: | | | | | | | |
Proceeds from issuance of long-term debt | |
| — | |
| 1,000,000 | |
Reduction in long-term debt | | | (151,508) | |
| (1,390,236) | |
Debt issuance costs | |
| (2,421) | |
| (19,149) | |
Proceeds from revolving credit facilities | |
| 565,000 | |
| 1,522,265 | |
Reduction in revolving credit facilities | | | (312,500) | |
| (1,125,000) | |
Repurchase of common and preferred shares | | | — | |
| (13,858) | |
Dividends to common and preferred shareholders | |
| (7,380) | |
| (18,885) | |
Redeemable noncontrolling interest distribution | | | (49,077) | |
| — | |
Distributions to noncontrolling interest | | | (1,790) | |
| (2,033) | |
Other | | | (2,496) | |
| (1,576) | |
Net cash (used for) provided by financing activities | |
| 37,828 | |
| (48,472) | |
Effect of exchange rate changes on cash and cash equivalents | | | (720) | |
| (3,987) | |
Net increase (decrease) in cash and cash equivalents and restricted cash | |
| 298,503 | | | 66,105 | |
Cash and cash equivalents and restricted cash, beginning of period | | | 475,280 | |
| 442,038 | |
Cash and cash equivalents and restricted cash, end of period | | $ | 773,783 | | $ | 508,143 | |
| | | | | | | |
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | | | | | | |
Cash and cash equivalents, beginning of period | | | 472,246 | |
| 435,990 | |
Restricted cash, beginning of period | | | 3,034 | |
| 6,048 | |
Cash and cash equivalents and restricted cash, beginning of period | | $ | 475,280 | | $ | 442,038 | |
| | | | | | | |
Cash and cash equivalents, end of period | | | 771,878 | |
| 504,985 | |
Restricted cash, end of period | | | 1,905 | |
| 3,158 | |
Cash and cash equivalents and restricted cash, end of period | | $ | 773,783 | | $ | 508,143 | |
| | | | | | | |
| | Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
| | (In thousands) | | ||||
Cash flows from operating activities: | | | | | | | |
Net income (loss) | | $ | (174,668) | | $ | (128,310) | |
Adjustments to net income (loss): | | | | | | | |
Depreciation and amortization | |
| 164,360 | |
| 177,277 | |
Deferred income tax expense (benefit) | |
| 3,721 | |
| (1,178) | |
Impairments and other charges | |
| — | |
| 355 | |
Amortization of debt discount and deferred financing costs | | | 4,984 | |
| 5,400 | |
Losses (gains) on debt buyback | |
| 36 | |
| (8,062) | |
Losses (gains) on long-lived assets, net | |
| 77 | |
| 8,524 | |
Losses (gains) on investments, net | |
| 1 | |
| (315) | |
Provision (recovery) of bad debt | | | — | |
| (2,339) | |
Share-based compensation | |
| 3,879 | |
| 6,775 | |
Foreign currency transaction losses (gains), net | |
| 4,214 | |
| 2,365 | |
Mark-to-market loss on warrants | | | 71,752 | |
| — | |
Noncontrolling interest | | | (9,828) | |
| (8,777) | |
Other | |
| 110 | |
| 398 | |
Changes in operating assets and liabilities, net of effects from acquisitions: | | | | | | | |
Accounts receivable | |
| (22,775) | |
| 32,017 | |
Inventory | |
| (5,621) | |
| 6,039 | |
Other current assets | |
| (8,039) | |
| (6,476) | |
Other long-term assets | |
| 2,136 | |
| (4,949) | |
Trade accounts payable and accrued liabilities | |
| 2,024 | |
| (17,697) | |
Income taxes payable | |
| 682 | |
| 15,766 | |
Other long-term liabilities | |
| 4,309 | |
| 2,677 | |
Net cash provided by (used for) operating activities | |
| 41,354 | |
| 79,490 | |
Cash flows from investing activities: | | | | | | | |
Purchases of investments | |
| (1,534) | |
| (14) | |
Sales and maturities of investments | |
| 5 | |
| 10,908 | |
Capital expenditures | |
| (84,258) | |
| (40,852) | |
Proceeds from sales of assets and insurance claims | |
| 3,671 | |
| 10,839 | |
Other | |
| 9 | |
| — | |
Net cash (used for) provided by investing activities | |
| (82,107) | |
| (19,119) | |
Cash flows from financing activities: | | | | | | | |
Reduction in long-term debt | | | (86,127) | |
| (16,838) | |
Debt issuance costs | |
| (3,858) | |
| (2,421) | |
Proceeds from revolving credit facilities | |
| 40,000 | |
| 95,000 | |
Reduction in revolving credit facilities | | | (500,000) | |
| (135,000) | |
Proceeds from issuance of common shares, net of issuance costs | |
| 257 | |
| — | |
Repurchase of common and preferred shares | | | (4,523) | |
| — | |
Dividends to common and preferred shareholders | |
| (10) | |
| (3,662) | |
Distributions to noncontrolling interest | | | (995) | |
| (49,077) | |
Other | | | — | |
| (1,923) | |
Net cash (used for) provided by financing activities | |
| (555,256) | |
| (113,921) | |
Effect of exchange rate changes on cash and cash equivalents | | | (1,289) | |
| (1,111) | |
Net increase (decrease) in cash and cash equivalents and restricted cash | |
| (597,298) | | | (54,661) | |
Cash and cash equivalents and restricted cash, beginning of period | | | 1,273,510 | |
| 475,280 | |
Cash and cash equivalents and restricted cash, end of period | | $ | 676,212 | | $ | 420,619 | |
| | | | | | | |
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | | | | | | |
Cash and cash equivalents, beginning of period | | | 991,471 | |
| 472,246 | |
Restricted cash, beginning of period | | | 282,039 | |
| 3,034 | |
Cash and cash equivalents and restricted cash, beginning of period | | $ | 1,273,510 | | $ | 475,280 | |
| | | | | | | |
Cash and cash equivalents, end of period | | | 394,028 | |
| 417,544 | |
Restricted cash, end of period | | | 282,184 | |
| 3,075 | |
Cash and cash equivalents and restricted cash, end of period | | $ | 676,212 | | $ | 420,619 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Mandatory Convertible | | | | | | | Capital | | Accumulated | | | | | | | | | | | | | | |||||
| | Preferred Shares | | Common Shares | | in Excess | | Other | | | | | | | | Non- | | | | | |||||||||
|
| |
| Par |
| |
| Par |
| of Par |
| Comprehensive |
| Retained |
| Treasury |
| controlling |
| Total | | ||||||||
(In thousands, except per share amounts) | | Shares | | Value | | Shares | | Value | | Value | | Income | | Earnings | | Shares | | Interest | | Equity | | ||||||||
As of June 30, 2020 |
| 4,870 | | $ | 5 | | 8,389 | | $ | 419 | | $ | 3,415,053 | | $ | (22,188) | | $ | (664,391) | | $ | (1,315,751) | | $ | 94,339 | | $ | 1,507,486 | |
Net income (loss) | | — | | �� | — | | — | | | — | | | — | | | — | | | (157,465) | | | — | | | 10,805 | | | (146,660) | |
Dividends to preferred shareholders ($0.75 per share) | | — | | | — | | — | | | — | | | — | | | — | | | (3,653) | | | — | | | — | | | (3,653) | |
Other comprehensive income (loss), net of tax |
| — | | | — | | — | | | — | | | — | | | 3,558 | | | — | | | — | | | — | | | 3,558 | |
Accrued distribution on redeemable noncontrolling interest in subsidiary | | — | | | — | | — | | | — | | | — | | | — | | | (4,353) | | | — | | | — | | | (4,353) | |
Other |
| — | | | — | | (4) | | | — | | | 4,414 | | | — | | | — | | | — | | | (1,028) | | | 3,386 | |
As of September 30, 2020 |
| 4,870 | | $ | 5 | | 8,385 | | $ | 419 | | $ | 3,419,467 | | $ | (18,630) | | $ | (829,862) | | $ | (1,315,751) | | $ | 104,116 | | $ | 1,359,764 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of June 30, 2021 |
| — | | $ | — | | 9,181 | | $ | 459 | | $ | 3,433,144 | | $ | (8,624) | | $ | (1,290,309) | | $ | (1,315,751) | | $ | 118,024 | | $ | 936,943 | |
Net income (loss) | | — | | | — | | — | | | — | | | — | | | — | | | (122,500) | | | — | | | 6,778 | | | (115,722) | |
PSU distribution equivalent rights | | — | | | — | | — | | | — | | | — | | | — | | | (65) | | | — | | | — | | | (65) | |
Other comprehensive income (loss), net of tax | | — | | | — | | — | | | — | | | — | | | (2,248) | | | — | | | — | | | — | | | (2,248) | |
Share-based compensation | | — | | | — | | — | | | — | | | 4,465 | | | — | | | — | | | — | | | — | | | 4,465 | |
Share issuance | | — | | | — | | 148 | | | 7 | | | 12,865 | | | — | | | — | | | — | | | — | | | 12,872 | |
Accrued distribution on redeemable noncontrolling interest in subsidiary | | — | | | — | | — | | | — | | | — | | | — | | | (2,356) | | | — | | | — | | | (2,356) | |
Other | | — | | | — | | 2 | | | — | | | (66) | | | — | | | — | | | — | | | — | | | (66) | |
As of September 30, 2021 | | — | | $ | — | | 9,331 | | $ | 466 | | $ | 3,450,408 | | $ | (10,872) | | $ | (1,415,230) | | $ | (1,315,751) | | $ | 124,802 | | $ | 833,823 | |
7
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Mandatory Convertible | | | | | | | Capital | | Accumulated | | | | | | | | | | | | | | Mandatory Convertible | | | | | | | Capital | | Accumulated | | | | | | | | | | | | | ||||||||||
| | Preferred Shares | | Common Shares | | in Excess | | Other | | | | | | | | Non- | | | | | Preferred Shares | | Common Shares | | in Excess | | Other | | | | | | | | Non- | | | | ||||||||||||||||||
|
| |
| Par |
| |
| Par |
| of Par |
| Comprehensive |
| Retained |
| Treasury |
| controlling |
| Total |
| |
| Par |
| |
| Par |
| of Par |
| Comprehensive |
| Retained |
| Treasury |
| controlling |
| Total | ||||||||||||||||
(In thousands, except per share amounts) | | Shares | | Value | | Shares | | Value | | Value | | Income | | Earnings | | Shares | | Interest | | Equity | | Shares | | Value | | Shares | | Value | | Value | | Income | | Earnings | | Shares | | Interest | | Equity | ||||||||||||||||
As of December 31, 2019 |
| 5,613 | | $ | 6 | | 8,324 | | $ | 416 | | $ | 3,412,972 | | $ | (11,788) | | $ | (104,775) | | $ | (1,314,020) | | $ | 67,354 | | $ | 2,050,165 | ||||||||||||||||||||||||||||
Net income (loss) | | — | | | — | | — | | | — | | | — | | | — | | | (697,404) | | | — | | | 38,437 | | | (658,967) | ||||||||||||||||||||||||||||
Dividends to common shareholders ($0.01 per share) | | — | | | — | | — | | | — | | | — | | | — | | | (3,633) | | | — | | | — | | | (3,633) | ||||||||||||||||||||||||||||
Dividends to preferred shareholders ($2.25 per share) | | — | | | — | | — | | | — | | | — | | | — | | | (10,958) | | | — | | | — | | | (10,958) | ||||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax |
| — | | | — | | — | | | — | | | — | | | (6,842) | | | — | | | — | | | — | | | (6,842) | ||||||||||||||||||||||||||||
Repurchase preferred shares | | (743) | | | (1) | | — | | | — | | | (12,126) | | | — | | | — | | | (1,731) | | | — | | | (13,858) | ||||||||||||||||||||||||||||
Share-based compensation | | — | | | — | | — | | | — | | | 20,170 | | | — | | | — | | | — | | | — | | | 20,170 | ||||||||||||||||||||||||||||
Noncontrolling interest contributions (distributions) | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | | (2,032) | | | (2,032) | ||||||||||||||||||||||||||||
Accrued distribution on redeemable noncontrolling interest in subsidiary | | — | | | — | | — | | | — | | | — | | | — | | | (13,092) | | | — | | | — | | | (13,092) | ||||||||||||||||||||||||||||
Other |
| — | | | — | | 61 | | | 3 | | | (1,549) | | | — | | | — | | | — | | | 357 | | | (1,189) | ||||||||||||||||||||||||||||
As of September 30, 2020 |
| 4,870 | | $ | 5 | | 8,385 | | $ | 419 | | $ | 3,419,467 | | $ | (18,630) | | $ | (829,862) | | $ | (1,315,751) | | $ | 104,116 | | $ | 1,359,764 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||
As of December 31, 2020 |
| 4,870 | | $ | 5 | | 8,383 | | $ | 419 | | $ | 3,423,935 | | $ | (11,124) | | $ | (946,100) | | $ | (1,315,751) | | $ | 105,424 | | $ | 1,256,808 | | 4,870 | | $ | 5 | | 8,383 | | $ | 419 | | $ | 3,423,935 | | $ | (11,124) | | $ | (946,100) | | $ | (1,315,751) | | $ | 105,424 | | $ | 1,256,808 |
Net income (loss) | | — | | | — | | — | | | — | | | — | | | — | | | (455,595) | | | — | | | 21,168 | | | (434,427) | | — | | | — | | — | | | — | | | — | | | — | | | (137,086) | | | — | | | 8,776 | | | (128,310) |
PSU distribution equivalent rights | | — | | | — | | — | | | — | | | — | | | — | | | (75) | | | — | | | — | | | (75) | | — | | | — | | — | | | — | | | — | | | — | | | (10) | | | — | | | — | | | (10) |
Dividends to preferred shareholders ($0.75 per share) | | — | | | — | | — | | | — | | | — | | | — | | | (3,653) | | | — | | | — | | | (3,653) | | — | | | — | | — | | | — | | | — | | | — | | | (3,653) | | | — | | | — | | | (3,653) |
Issuance of warrants on common shares | | — | | | — | | — | | | — | | | — | | | — | | | (2,719) | | | — | | | — | | | (2,719) | ||||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | | — | | | — | | — | | | — | | | — | | | 368 | | | — | | | — | | | — | | | 368 | ||||||||||||||||||||||||||||
Share-based compensation | | — | | | — | | — | | | — | | | 6,775 | | | — | | | — | | | — | | | — | | | 6,775 | ||||||||||||||||||||||||||||
Accrued distribution on redeemable noncontrolling interest in subsidiary | | — | | | — | | — | | | — | | | — | | | — | | | (2,402) | | | — | | | — | | | (2,402) | ||||||||||||||||||||||||||||
Other | | — | | | — | | 120 | | | (2) | | | (1,621) | | | — | | | — | | | — | | | 1 | | | (1,622) | ||||||||||||||||||||||||||||
As of March 31, 2021 |
| 4,870 | | $ | 5 | | 8,503 | | $ | 417 | | $ | 3,429,089 | | $ | (10,756) | | $ | (1,089,251) | | $ | (1,315,751) | | $ | 114,201 | | $ | 1,127,954 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||
As of December 31, 2021 | | — | | $ | — | | 9,295 | | $ | 466 | | $ | 3,454,563 | | $ | (10,634) | | $ | (1,537,988) | | $ | (1,315,751) | | $ | 128,282 | | $ | 718,938 | ||||||||||||||||||||||||||||
Net income (loss) | | — | | | — | | — | | | — | | | — | | | — | | | (184,496) | | | — | | | 9,828 | | | (174,668) | ||||||||||||||||||||||||||||
PSU distribution equivalent rights | | — | | | — | | — | | | — | | | — | | | — | | | (9) | | | — | | | — | | | (9) | ||||||||||||||||||||||||||||
Warrant Exercise, net of tax | | — | | | — | | 1,024 | | | 52 | | | 139,436 | | | — | | | — | | | — | | | — | | | 139,488 | ||||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | | — | | | — | | — | | | — | | | — | | | 252 | | | — | | | — | | | — | | | 252 | | — | | | — | | — | | | — | | | — | | | 1,336 | | | — | | | — | | | — | | | 1,336 |
Noncontrolling interest contributions (distributions) | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | | (1,790) | | | (1,790) | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | | (996) | | | (996) |
Share issuance | | — | | | — | | 148 | | | 7 | | | 12,865 | | | — | | | — | | | — | | | — | | | 12,872 | ||||||||||||||||||||||||||||
Share-based compensation | | — | | | — | | — | | | — | | | 15,205 | | | — | | | — | | | — | | | — | | | 15,205 | | — | | | — | | — | | | — | | | 3,879 | | | — | | | — | | | — | | | — | | | 3,879 |
Conversion of preferred shares | | (4,870) | | | (5) | | 668 | | | 34 | | | (34) | | | — | | | — | | | — | | | — | | | (5) | ||||||||||||||||||||||||||||
Accrued distribution on redeemable noncontrolling interest in subsidiary | | — | | | — | | — | | | — | | | — | | | — | | | (7,088) | | | — | | | — | | | (7,088) | | — | | — | — | | — | | | — | | | — | | | — | | | (2,545) | | | — | | | — | | | (2,545) |
Other | | — | | | — | | 132 | | | 6 | | | (1,563) | | | — | | | — | | | — | | | — | | | (1,557) | | — | | | — | | 156 | | | 5 | | | (4,523) | | | — | | | (175) | | | — | | | — | | | (4,693) |
As of September 30, 2021 | | — | | $ | — | | 9,331 | | $ | 466 | | $ | 3,450,408 | | $ | (10,872) | | $ | (1,415,230) | | $ | (1,315,751) | | $ | 124,802 | | $ | 833,823 | ||||||||||||||||||||||||||||
As of March 31, 2022 | | — | | $ | — | | 10,475 | | $ | 523 | | $ | 3,593,355 | | $ | (9,298) | | $ | (1,725,213) | | $ | (1,315,751) | | $ | 137,114 | | $ | 680,730 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
87
Nabors Industries Ltd. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 General
Unless the context requires otherwise, references in this report to “we,” “us,” “our,” “the Company,” or “Nabors” mean Nabors Industries Ltd., together with our subsidiaries where the context requires. References in this report to “Nabors Delaware” mean Nabors Industries, Inc., a wholly owned subsidiary of Nabors.
Our business is comprised of our global land-based and offshore drilling rig operations and other rig related services and technologies. These services and technologies include tubular running services, wellbore placement solutions, directional drilling, measurement-while-drilling (“MWD”), logging-while-drilling (“LWD”) systems and services, equipment manufacturing, rig instrumentation and drilling optimization software.
With operations in approximately 20over 15 countries, we are a global provider of drilling and drilling-related services for land-based and offshore oil and natural gas wells, with a fleet of rigs and drilling-related equipment which, as of September 30, 2021March 31, 2022 included:
● |
● | 29 actively marketed rigs for offshore platform drilling operations in the United States and multiple international markets. |
Fiscal Year 2021 DispositionThe short and long-term implications of the military hostilities between Russia and Ukraine, which began on February 24, 2022, are difficult to predict at this time. We continue to actively monitor this dynamic situation and will fulfill any existing activity in full compliance with applicable international laws and sanctions. As of March 31, 2022, 1.3% of our property, plant and equipment, net was located in Russia. For the three months ending March 31, 2022, 1.4% of our operating revenues were from operations in Russia.
In July 2021, we closed on the sale of our Canada Drilling segment assets for approximately $94.0 million. These assets included our fleet of 35 land-based drilling rigs and related equipment and property. This transaction did not represent a strategic shift in our operations and will not have a major effect on our operations and financial results going forward.
Note 2 Summary of Significant Accounting Policies
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements of Nabors have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC” or “Commission”), certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted. Therefore, these financial statements should be read together with our annual report on Form 10-K for the year ended December 31, 20202021 (“20202021 Annual Report”). In management’s opinion, the unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to state fairly our financial position as of September 30, 2021March 31, 2022 and the results of operations, comprehensive income (loss), cash flows and changes in equity for the periods presented herein. Interim results for the ninethree months ended September 30, 2021March 31, 2022 may not be indicative of results that will be realized for the full year ending December 31, 2021.2022.
Principles of Consolidation
Our condensed consolidated financial statements include the accounts of Nabors, as well as all majority owned and non-majority owned subsidiaries consolidated in accordance with U.S. GAAP. All significant intercompany accounts and transactions are eliminated in consolidation.
In addition to the consolidation of our majority owned subsidiaries, we also consolidate variable interest entities (“VIE”) when we are determined to be the primary beneficiary of a VIE. Determination of the primary beneficiary of a VIE is based on whether an entity has (1) the power to direct activities that most significantly impact the economic performance of the VIE and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our joint venture, SANAD, which is equally owned by Saudi Aramco and Nabors,
98
potentially be significant to the VIE. Our joint venture, SANAD, which is equally owned by Saudi Aramco and Nabors, has been consolidated. As we have the power to direct activities that most significantly impact SANAD’s economic performance, including operations, maintenance and certain sourcing and procurement, we have determined Nabors to be the primary beneficiary. See Note 3—Joint Ventures.
Prior Period Revision
During the preparation of our consolidated financial statements for the three and nine months ended September 30, 2021, we identified an error in the presentation of the number of common shares in our previously issued Consolidated Statements of Changes in Equity. The error resulted from our presentation of the 1-for-50 reverse stock split approved by our shareholders on April 20, 2020 (the “Reverse Stock Split”), as a reduction in the number of shares outstanding during the quarter ended June 30, 2020, rather than retrospectively adjusting all common share quantities presented in all Consolidated Statements of Changes in Equity issued subsequent to the Reverse Stock Split as required under U.S. GAAP. The errors only impacted the presentation of common share quantities in our Consolidated Statements of Changes in Equity, and had no impact on amounts presented for Weighted-average number of common shares outstanding, Earnings (losses) per share, Par Value, Capital in Excess of Par Value, or Total Equity; or on our financial position, results of operations or cash flow.
We have assessed the presentation errors described above and concluded they are not material to our previously issued consolidated financial statements for any impacted period. However, management has elected to revise previously issued financial statements to properly present common share quantities presented in our previously issued Consolidated Statements of Changes in Equity included herein to appropriately reflect the Reverse Stock Split, and will be similarly revised in future filings, as applicable. The remaining impacted comparative periods in 2020 and 2021 not presented herein will be revised, as applicable, in future filings.
Inventory
Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out or weighted-average cost methods and includes the cost of materials, labor and manufacturing overhead. Inventory included the following:
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | March 31, | | December 31, | | ||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||
Raw materials | | $ | 109,304 | | $ | 133,424 | | | $ | 108,912 | | $ | 105,638 | |
Work-in-progress | |
| 6,084 | |
| 3,452 | | |
| 2,336 | |
| 1,368 | |
Finished goods | |
| 21,604 | |
| 23,709 | | |
| 20,878 | |
| 19,442 | |
| | $ | 136,992 | | $ | 160,585 | | | $ | 132,126 | | $ | 126,448 | |
Recently Adopted Accounting PronouncementsSpecial Purpose Acquisition Company
In June 2016,Nabors Energy Transition Corp. (“NETC”) is a consolidated VIE that is included in the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes accounting requirements for the recognition of credit losses from an incurred or probable impairment methodology to a current expected credit losses (CECL) methodology. The guidance is effective for interim and annual periods beginning after December 15, 2019. The guidance has been applied using the modified retrospective method with a cumulative effect adjustment to beginning retained earnings. Trade receivables (including the allowance for credit losses) are the only financial instrument in scope for ASU 2016-13 currently held by the Company. The adoption of this guidance did not have a material impact on our condensedaccompanying consolidated financial statements.statements under the following captions:
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for intraperiod allocations and interim tax calculations and adds guidance to simplify accounting for income taxes. The guidance is effective for interim and annual periods beginning after December 15, 2020. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.Restricted cash held in trust
10
Redeemable noncontrolling interest in subsidiary
The company accounts for the non-controlling interest in NETC as subject to possible redemption in accordance with FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” NETC’s common stock features certain redemption rights, which are considered to be outside the company’s control and subject to occurrence of uncertain future events. Accordingly, the $281.5 million of non-controlling interest subject to possible redemption is presented at full redemption value as temporary equity, outside of the stockholders’ equity section in the accompanying consolidated financial statements as of March 31, 2022.
Nabors will recognize any future changes in redemption value immediately as they occur – i.e., adjust the carrying amount of the instrument to its current redemption amount at each reporting period.
Note 3 Joint Ventures
During 2016, we entered into an agreement with Saudi Aramco to form a joint venture known as SANAD to own, manage and operate onshore drilling rigs in the Kingdom of Saudi Arabia. SANAD is equally owned by Saudi Aramco and Nabors.
During 2017, Nabors and Saudi Aramco each contributed $20 million in cash for the purpose of capitalizing the joint venture upon formation. In addition, since inception Nabors and Saudi Aramco have each contributed a combination of drilling rigs, drilling rig equipment and other assets, including cash, each with a value of approximately $394 million to the joint venture. The contributions were received in exchange for redeemable ownership interests which accrue interest annually, have a twenty-five year maturity and are required to be converted to authorized capital should certain events occur, including the accumulation of specified losses. In the accompanying condensed consolidated balance sheet, Nabors has reported Saudi Aramco’s share of authorized capital as a component of noncontrolling interest in equity and Saudi Aramco’s share of the redeemable ownership interests as redeemable noncontrolling interest in subsidiary, classified as mezzanine equity. As of March 31, 2022, the amount included in redeemable noncontrolling
9
interest was $396.3 million. The accrued interest on the redeemable ownership interest is a non-cash financing activity and is reported as an increase in the redeemable noncontrolling interest in subsidiary line in our condensed consolidated balance sheet. In January 2021, SANAD settled approximately $100$120 million of the accrued interest from inception to December 31, 2020,2021, by making a cash paymentpayments to each partner for their respective amounts. The assets and liabilities included in the condensed balance sheet below are (1) assets that can either be used to settle obligations of the VIE or be made available in the future to the equity owners through dividends, distributions or in exchange of the redeemable ownership interests (upon mutual agreement of the owners) or (2) liabilities for which creditors do not have recourse to other assets of Nabors.
The condensed balance sheet of SANAD, as included in our condensed consolidated balance sheet, is presented below.
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | March 31, | | December 31, | | ||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||
Assets: | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 322,461 | | $ | 368,981 | | | $ | 308,761 | | $ | 293,037 | |
Accounts receivable | |
| 70,383 | |
| 79,711 | | |
| 79,366 | |
| 88,174 | |
Other current assets | |
| 9,047 | |
| 17,148 | | |
| 6,703 | |
| 6,662 | |
Property, plant and equipment, net | |
| 467,606 | |
| 428,331 | | |
| 492,676 | |
| 467,587 | |
Other long-term assets | |
| 20,128 | |
| 2,590 | | |
| 19,006 | |
| 19,010 | |
Total assets | | $ | 889,625 | | $ | 896,761 | | | $ | 906,512 | | $ | 874,470 | |
Liabilities: | | | | | | | | | | | | | | |
Accounts payable | | $ | 72,508 | | $ | 61,808 | | | $ | 61,722 | | $ | 61,278 | |
Accrued liabilities | |
| 11,635 | |
| 18,791 | | |
| 10,812 | |
| 6,021 | |
Other long-term liabilities | | | 18,967 | | | — | | |||||||
Other liabilities | | | 26,597 | | | 26,300 | | |||||||
Total liabilities | | $ | 103,110 | | $ | 80,599 | | | $ | 99,131 | | $ | 93,599 | |
Note 4 Accounts Receivable Purchase and Sales AgreementAgreements
The Company has entered into an accounts receivable agreementssales agreement (the “A/R Agreements”Sales Agreement” and, together with the A/R Purchase Agreement (as defined below), the “A/R Facility”) to sell short-term receivables from certain customer trade accounts to an unaffiliated financial institution on a revolving basis. In July 2021, we entered into the First Amendment to the A/R Sales Agreement (the “First Agreement”), which reduced the commitments of the third-party financial institutions (the “Purchasers”) from $250 million to $150 million and extended the term of the agreements by two years, to August 13, 2023.
As part of the A/R Agreements,Facility, the Company continuously sells designated pools of receivables as they are originated by it and certain U.S. subsidiaries to a separate, bankruptcy-remote, special purpose entity (“SPE”) pursuant to a purchase agreement between the SPE and the Company (the “A/R Purchase Agreement”). The SPE in turn sells, transfers, conveys and assigns to the Purchasers all the rights, title and interest in and to its pool of eligible receivables.receivables (the “Eligible Receivables”). The sale of these receivablesthe Eligible Receivables qualified for sale accounting treatment in accordance with ASC 860.860 – Transfers and Servicing. During the period of this program, cash receipts from the Purchasers at the time of the sale are classified as operating activities in our consolidated statement of cash flows and the associated receivables are derecognized from the Company’s condensed consolidated balance sheet at the time of the sale. The remaining receivables held by the SPE were pledged to secure the collectability of the sold Eligible Receivables. Subsequent collections on the pledged receivables, which have not been sold, will be classified as operating cash flows in our consolidated statement of cash flows at the time of collection. The
11
remaining receivables held by the SPE were pledged to secure the collectability of the sold receivables. The amount of receivables pledged as collateral as of September 30, 2021March 31, 2022 and December 31, 20202021 is approximately $41.8$55.3 million and $63.1$44.2 million, respectively.
The amount available for sale to the Purchasers under the A/R AgreementsSales Agreement fluctuates over time based on the total amount of eligible receivablesEligible Receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. As of September 30, 2021,March 31, 2022, approximately $96.0$136.0 million had been sold to and as yet uncollected by the Purchasers. As of December 31, 2020,2021, the corresponding number was approximately $54.0$113.0 million.
10
Note 5 Debt
Debt consisted of the following:
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | March 31, | | December 31, | | ||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||
4.625% senior notes due September 2021 (1) | | $ | — | | $ | 86,329 | | |||||||
5.50% senior notes due January 2023 | |
| 24,446 | |
| 28,443 | | |||||||
5.50% senior notes due January 2023 (1) | | $ | 21,226 | | $ | 24,446 | | |||||||
5.10% senior notes due September 2023 | |
| 91,962 | |
| 121,077 | | |
| 62,338 | |
| 82,703 | |
0.75% senior exchangeable notes due January 2024 | |
| 256,779 | |
| 279,700 | | |
| 162,065 | |
| 259,839 | |
5.75% senior notes due February 2025 | | | 577,458 | |
| 610,818 | | | | 526,628 | |
| 548,458 | |
6.50% senior priority guaranteed notes due February 2025 | |
| 50,485 | | | 50,485 | | |
| — | | | 50,485 | |
9.00% senior priority guaranteed notes due February 2025 | | | 218,082 | | | 192,032 | | | | 218,082 | | | 218,082 | |
7.25% senior guaranteed notes due January 2026 | | | 559,978 | |
| 559,978 | | | | 557,902 | |
| 559,978 | |
7.375% senior priority guaranteed notes due May 2027 | | | 700,000 | |
| 700,000 | | |||||||
7.50% senior guaranteed notes due January 2028 | | | 389,609 | |
| 389,609 | | | | 389,609 | |
| 389,609 | |
2018 revolving credit facility | |
| 925,000 | | | 672,500 | | |
| — | | | 460,000 | |
| | | 3,093,799 | | | 2,990,971 | | | $ | 2,637,850 | | $ | 3,293,600 | |
Less: deferred financing costs | | | 18,279 | | | 22,270 | | | | 27,758 | | | 30,805 | |
Long-term debt | | $ | 3,075,520 | | $ | 2,968,701 | | | $ | 2,610,092 | | $ | 3,262,795 | |
(1) | The |
During the ninethree months ended September 30, 2021,March 31, 2022, we repurchased $67.6$27.1 million aggregate principal amount of various outstanding Nabors Delaware’s notes for approximately $57.4$27.0 million in cash, including principal and $1.2$0.3 million in accrued and unpaid interest. In connection with these repurchases, we recognized a net gain of approximately $10.7 millionminimal loss for the ninethree months ended SeptemberMarch 30, 202131, 2022 which is included in Other, net in our condensed consolidated statement of income (loss).
During Also, during the three months ended September 30, 2021, we repaidMarch 31, 2022, $130.7 million in maturity value of our notes were tendered by warrant holders, and retired, in connection with exercises of the remaining balance of $82.5 million aggregate principal amount outstanding on our 4.625% senior notes due September 2021.common stock warrants.
Exchange Transactions
During the first quarter of 2021, we entered into two private exchange transactions in which Nabors Delaware exchanged 9.0% senior priority guaranteed notes due 2025 (the “9.0% Exchange Notes”) for various amounts of existing outstanding notes. Nabors Delaware did not receive any cash proceeds from the issuance of the Exchange Notes.
Collectively from the series of exchanges, Nabors Industries, Inc. issued $26.1$26.1 million aggregate principal amount of the 9.0% Exchange Notes in exchange for $40.0 million aggregate principal amount of various Nabors Delaware’s Notes.
We recorded a minimal gain in connection with the exchange transactions, which was accounted for in accordance with ASC 470-60, Troubled Debt Restructuring by Debtors. Under ASC 470-60, a gain is recorded in an amount equal to the sum of the future undiscounted payments (principal and interest) related to the new Exchange Notes plus the costs
12
incurred in connection with the transaction, less the carrying value of the notes that were exchanged. In relation to the transactions, we recorded $9.4 million related to future contractual interest payments on the new Exchange Notes and have included this amount in accrued liabilities and other long-term liabilities.
The aggregate principal amounts and recognized gain for such transactions were as follows (in thousands):
| | | | | | |
| | Nine months ended September 30, | | Three months ended March 31, | ||
|
| 2021 |
| 2021 | ||
Exchanged | | | | | (in thousands) | |
0.75% senior exchangeable notes due January 2024 | | $ | 35,000 | | $ | 35,000 |
5.75% senior notes due February 2025 | |
| 5,000 | |
| 5,000 |
Aggregate principal amount exchanged | |
| 40,000 | |
| 40,000 |
Aggregate principal amount of debt issued in exchanges | | | 26,050 | | | 26,050 |
11
0.75% Senior Exchangeable Notes Due January 2024
In January 2017, Nabors Delaware issued $575.0 million in aggregate principal amount of 0.75% exchangeable senior unsecured notes due 2024, which are fully and unconditionally guaranteed by Nabors. The notes bear interest at a rate of 0.75% per year payable semiannually on January 15 and July 15 of each year, beginning on July 15, 2017. As of September 30, 2021,March 31, 2022, there was approximately $256.8$177.0 million in aggregate principal amount that remained outstanding.
The exchangeable notes are currently exchangeable, under certain conditions, at an exchange rate of .8018 common shares of Nabors per $1,000 principal amount of exchangeable notes (equivalent to an exchange price of approximately $1,247.19 per common share). The exchangeable notes were originally bifurcated for accounting purposes into debt and equity components of $411.2 million and $163.8 million, respectively, based on the terms of the notes and the relative fair value at the issuance date. Upon any exchange, as a result of an amendment to the notes, Nabors Delaware will settle its exchange obligation in cash.
2018 Revolving Credit Facility
In October 2018, Nabors Delaware and Nabors Drilling Canada Limited (“Nabors Canada” and together with Nabors Delaware, the “Borrowers”) entered into a credit agreement dated October 11, 2018 by and among the Borrowers, the Guarantorsguarantors identified therein, HSBC Bank Canada, as the Canadian lender (the “Canadian Lender”) the issuing banks and other lenders party thereto (the “US“U.S. Lenders” and, together with the Canadian Lender, the “Lenders”) and Citibank, N.A., as administrative agent solely for the U.S. Lenders (as may be amended, restated, supplemented or otherwise modified from time to time, the “2018 Revolving Credit Facility”). The 2018 Revolving Credit Facility originally had a borrowing capacityAs of $1.267 billion and is fully and unconditionally guaranteed by Nabors and certain of its wholly owned subsidiaries. The 2018 Revolving Credit Facility matures at the earlier of (a) October 11, 2023 and (b) July 19,January 21, 2022, if any of Nabors Delaware’s existing 5.50% senior notes due January 2023 remainwe repaid all amounts outstanding as of such date. The 2018 Revolving Credit Facility contains certain affirmative and negative covenants. Amendment No. 1 tounder the 2018 Revolving Credit Facility provided for additional currencies in which letters of credit could be issued. On December 13, 2019, Amendment No. 2 was entered into which reduced the borrowing capacity to $1.0136 billion ($981.6 million for Nabors Delaware and $32.0 million for Nabors Canada), and replaced the net funded debt to capitalization covenant with a covenant to maintain net funded indebtedness at no greater than 5.5 times EBITDA. Amendment No. 3 to the 2018 Revolving Credit Facility was entered into on March 3, 2020, in order to permit letters of credit from the Canadian Lender on the portion of the facility dedicated to Canadian borrowings.terminated.
In September 2020, Amendment No. 4 was2022 Credit Agreement
On January 21, 2022, we entered into a revolving credit agreement between Nabors Delaware, the guarantors from time to time party thereto, the issuing banks (the “Issuing Banks”) and other lenders party thereto (the “Lenders”) and Citibank, N.A., as administrative agent (the “2022 Credit Agreement”). Under the 2022 Credit Agreement, the Lenders have committed to provide up to an aggregate principal amount at any time outstanding not in orderexcess of $350.0 million (with an accordion feature for an additional $100.0 million) to reviseNabors Delaware under a secured revolving credit facility, including sub-facilities provided by certain of the covenant andLenders for letters of credit in an aggregate principal amount at any time outstanding not in excess of $100.0 million.
The 2022 Credit Agreement permits the incurrence of additional indebtedness secured by liens, which may include liens on the collateral requirements undersecuring the 2018 Revolving Credit Facility. Amendment No. 4 providesfacility, in an amount up to $150.0 million as well as a grower basket for term loans in an amount not to exceed $100.0 million secured by liens not on the Lenders with a first lien security interest in certain drilling rigs located in the U.S. and Canada and replaced the prior covenantcollateral. The Company is required to maintain net fundedan interest coverage ratio (EBITDA/interest expense), which increases on a quarterly basis, and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. The facility matures on the earlier of (a) January 21, 2026 and (b) (i) to the extent any principal amount of Nabors Delaware’s existing 5.1% senior notes due 2023, 5.5% senior notes due 2023 and 5.75% senior notes due 2025 remains outstanding on the date that is 90 days prior to the applicable maturity date for such indebtedness, then such 90th day or (ii) to the extent 50% or more of the outstanding (as of the closing date) aggregate principal amount of the 0.75% senior exchangeable notes due 2024 remains outstanding and not refinanced or defeased on the date that is 90 days prior to the maturity date for such indebtedness, then such 90th day.
Additionally, the Company is subject to certain covenants, which are subject to certain exceptions and include, among others, (i) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million) , (ii) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness and (iii) a covenant restricting the ability of the Company’s subsidiaries to incur debt at no greater than 5.5 times EBITDA with(subject to the grower basket of up to $100.0 million). The agreement also includes a new covenantcollateral coverage requirement that the collateral rig fair value is to maintain minimum liquidity ofbe no less than $160.0 million at any time. Minimum liquidity isthe collateral coverage threshold, as defined in the agreement. This requirement includes an independent appraisal report to mean, generally, a consolidated cash balance consisting of (a)be delivered every 6 months following the aggregate amount of unrestricted cash and cash equivalents maintained in a deposit account U.S. or Canadian branch of a commercial bank, plus (b) the lesser of $75 million or an amount equal to 75%closing date.
of the aggregate amount of unrestricted cash and cash equivalents held in deposit account of a commercial bank outside of the U.S. or Canada, plus (c) available commitments under the 2018 Revolving Credit Facility. Additionally, the “asset to debt coverage” ratio was revised such that during any period in which Nabors Delaware fails to maintain an investment grade rating from at least two
1312
ratings agencies, the guarantors under the facility and their respective subsidiaries will be required to maintain an asset to debt coverage of at least 4.25:1, which was the case as of the date of this report. On July 29, 2021, in connection with the closing of the sale of substantially all of our Canada Drilling assets, we entered into a Canadian Amending Agreement with the Canadian Lender under which we repaid all outstanding loans owed to the Canadian Lender under the 2018 Revolving Credit Facility, the first lien security interest in the Canada Drilling assets was released and the commitments of the Canadian Lender under the 2018 Revolving Credit Facility were terminated.
As of September 30, 2021,March 31, 2022, we had $925.0 million0 borrowings outstanding under our 2018 Revolving2022 Credit Facility and the net book value of the collateralized assets under the 2018 Revolving Credit Facility was $1.23 billion.Agreement. The weighted average interest rate on borrowings under the 2018 Revolving2022 Credit FacilityAgreement at September 30, 2021March 31, 2022 was 3.72%3.23%. In order to make any future borrowings under the 2018 Revolving2022 Credit Facility,Agreement, Nabors and certain of its wholly owned subsidiaries are subject to compliance with the conditions and covenants contained therein, including compliance with applicable financial ratios.
As of the date of this report, we were in compliance with all covenants under the 2018 Revolving2022 Credit Facility.Agreement. We expect to remain in compliance with all covenants under the 2018 Revolving2022 Credit FacilityAgreement during the twelve-monthtwelve month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.
Note 6 Shareholders’ Equity
Common shares
At a special meeting of shareholders held April 20, 2020, our shareholders authorized a combination of our common shares (the “Reverse Stock Split”) at a ratio of not less than 1-for-15 and not greater than 1-for-50, with the exact ratio to be set within that range at the sole direction of our Board of Directors (the “Board”). On April 20, 2020, the Board set the Reverse Stock Split ratio at 1-for-50. As a result of the Reverse Stock Split, 50 pre-reverse split common shares automatically combined into one new common share, without any action on the part of the shareholders. Nabors’ authorized number of common shares were also proportionally decreased from 800,000,000 to 16,000,000 common shares. Subsequently, the par value of each common share was proportionally increased from $0.001 to $0.05. In addition, at the special meeting, the shareholders authorized an increase in our common share capital by 100% following the Reverse Stock Split, to $1,600,000, resulting in an increase in the number of authorized common shares to 32,000,000. NaN fractional common shares were issued as a result of the Reverse Stock Split. Any fractional common shares of registered holders resulting from the Reverse Stock Split were rounded up to the nearest whole share. All share and per share information included in the accompanying financial statements has been retrospectively adjusted to reflect this Reverse Stock Split.
On July 19, 2021, we issued 147,974 shares, valued at approximately $12.9 million, in connection with the purchase of certain development stage technologies in the energy transition space. Of the shares issued, 71,280 shares are forfeitable if certain milestones are not achieved over the next two years.
Common stock warrants
On May 27, 2021, the Board declared a distribution to holders of the Company’s common shares of warrants to purchase its common shares (the “Warrants”). Holders of Nabors common shares received two-fifths of a warrant per common share held as of the record date (rounded down for any fractional warrant). Nabors issued approximately 3.2 million warrants on June 11, 2021 to shareholders of record as of June 4, 2021. As of March 31, 2022, 2.5 million warrants remain outstanding and 1.0 million of common shares have been issued as a result of exercises of warrants.
Each Warrant represents the right to purchase 1 common share at an initial exercise price of $166.66667 per Warrant, subject to certain adjustments (the “Exercise Price”). In addition, Warrants submitted for exercise may be eligible to receive an additional one-third common share due to the incentive share component. The incentive share is an extra amount of common shares that Nabors will award when the volume weighted average price of Nabors’ common shares on the day before any Warrant holder exercises its Warrants multiplied by 3 is at least 6% higher than the sum of the volume weighted average prices of Nabors’ common shares on each of the second, third and fourth days before any Warrant holder exercises its Warrants. Effective as of April 25, 2022, Warrant holders were no longer entitled to receive any incentive shares when exercising the Warrants. Payment for common shares on exercise of Warrants may be in (i) cash or
14
(ii)“Designated Notes,” which the Company initially definesdefined as (a) Nabors Delaware’s (i) 5.10% Notes due 2023, (ii) 0.75% Exchangeable Notes due 2024, (iii) 5.75% Notes due 2025 and (b) the Company’s 7.25% Notes due 2026, subject to compliance with applicable procedures with respect to the delivery of the Warrants and Designated Notes. Effective March 21, 2022, the 0.75% Exchangeable Notes due 2024 was removed from the list of Designated Notes. The Exercise Price and the number of common shares issuable upon exercise are subject to anti-dilution adjustments, including for share dividends, splits, subdivisions, spin-offs, consolidations, reclassifications, combinations, noncash distributions, cash dividends (other than regular quarterly cash dividends not exceeding a permitted threshold amount), certain pro rata shares repurchases, and similar transactions, including certain issuances of common shares (or securities exercisable or convertible into or exchangeable for common shares) at a price (or having a conversion price) that is less than 95% of the market price of the common shares. The Warrants expire on June 11, 2026, but the expiration date may be accelerated at any time by the Company upon 20-days’ prior notice. The Company has listed the Warrants on the over-the-counter market.
The common stock warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the Warrants was initially measured at fair value using a Monte Carlo pricing model and subsequently, due to the level of market activity. As of March 31, 2022, the fair value of the Warrants have been estimatedwas measured using a Monte Carlo pricing model at each measurement date.their trading price to account for increased trading volume. At distribution, the fair value of the Warrants was $2.7 million. At September 30, 2021,On March 31, 2022, the fair value of the Warrants was
13
approximately $0.1 million and $2.657.2 million. During the three months ended March 31, 2022, approximately $73.2 million of gainloss has been recognized during 2021 for the decreaseincrease in liability.liability and included in Other, net in our consolidated statements of income (loss).
Note 7 Fair Value Measurements
Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best information available. Accordingly, we employ valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. We are able to classify fair value balances utilizing a fair value hierarchy based on the observability of those inputs.
Under the fair value hierarchy:
● | Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; |
● | Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and |
● | Level 3 measurements include those that are unobservable and of a subjective nature. |
Our financial liabilities that are accounted for at fair value on a recurring basis as of March 31, 2022 consisted of our common stock warrants. During the three months ended March 31, 2022, the common stock warrants transferred from using Level 3 inputs to Level 1 measurements due to increased trading volume. As of March 31, 2022, our common stock warrants were carried at fair market value and totaled $57.2 million.
Recurring Fair Value Measurements
The fair value of the common stock warrants was initially measured at fair value using a Monte Carlo option pricing model and subsequently,model. As of December 31, 2021, the fair value of the warrants have been estimated using the Monte Carlo pricing model for each measurement date. The estimated fair value of the warrants is determined using Level 3 inputs. Inherent in the option pricing simulation are assumptions related to expected stock-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its common stock warrants based on implied and historical volatility of the company’s traded common stock. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on
15
the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is based on the Company’s ability to initiate expiration, subject to a 20 business day notice period.
Nonrecurring Fair Value Measurements
We applied fair value measurements to our nonfinancial assets and liabilities measured on a nonrecurring basis, which consist of measurements primarily related to assets held for sale, goodwill, intangible assets and other long-lived assets and assets acquired and liabilities assumed in a business combination. Based upon our review of the fair value hierarchy, the inputs used in these fair value measurements were considered Level 3 inputs.
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Fair Value of Financial Instruments
We estimate the fair value of our financial instruments in accordance with U.S. GAAP. The fair value of our long-term debt and revolving credit facilities is estimated based on quoted market prices or prices quoted from third-party financial institutions. The fair value of our debt instruments is determined using Level 2 measurements. The carrying and fair values of these liabilities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | ||||||||
| | Value | | Value | | Value | | Value | | Value | | Value | | Value | | Value | ||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
4.625% senior notes due September 2021 |
| $ | — | | $ | — |
| $ | 86,329 | | $ | 78,862 | ||||||||||||
5.50% senior notes due January 2023 |
|
| 24,446 | |
| 24,117 |
|
| 28,443 | |
| 18,768 |
| $ | 21,226 | | $ | 21,536 |
| $ | 24,446 | | $ | 24,736 |
5.10% senior notes due September 2023 |
|
| 91,962 | |
| 90,284 |
|
| 121,077 | |
| 78,435 |
|
| 62,338 | |
| 63,685 |
|
| 82,703 | |
| 84,044 |
0.75% senior exchangeable notes due January 2024 |
|
| 256,779 | |
| 253,182 |
|
| 279,700 | |
| 169,458 |
|
| 162,065 | |
| 168,155 |
|
| 259,839 | |
| 257,730 |
5.75% senior notes due February 2025 | |
| 577,458 | |
| 534,270 |
|
| 610,818 | |
| 318,871 | |
| 526,628 | |
| 513,304 |
|
| 548,458 | |
| 508,881 |
6.50% senior priority guaranteed notes due February 2025 | |
| 50,485 | |
| 50,102 |
|
| 50,485 | |
| 44,059 | |
| — | |
| — |
|
| 50,485 | |
| 50,490 |
9.00% senior priority guaranteed notes due February 2025 | | | 218,082 | | | 226,116 | | | 192,032 | |
| 185,221 | | | 218,082 | | | 227,346 | | | 218,082 | |
| 226,914 |
7.25% senior guaranteed notes due January 2026 | |
| 559,978 | |
| 544,730 |
|
| 559,978 | |
| 396,106 | |
| 557,902 | |
| 557,935 |
|
| 559,978 | |
| 522,079 |
7.375% senior priority guaranteed notes due May 2027 | |
| 700,000 | |
| 728,049 |
|
| 700,000 | |
| 724,906 | ||||||||||||
7.50% senior guaranteed notes due January 2028 | |
| 389,609 | |
| 370,483 |
|
| 389,609 | |
| 267,369 | |
| 389,609 | |
| 379,058 |
|
| 389,609 | |
| 346,966 |
2018 revolving credit facility |
|
| 925,000 | |
| 925,000 |
|
| 672,500 | |
| 672,500 |
|
| — | |
| — |
|
| 460,000 | |
| 460,000 |
| | $ | 3,093,799 | | $ | 3,018,284 | | $ | 2,990,971 | | $ | 2,229,649 | | $ | 2,637,850 | | $ | 2,659,069 | | $ | 3,293,600 | | $ | 3,206,746 |
Less: deferred financing costs | | | 18,279 | | | | | | 22,270 | | | | | | 27,758 | | | | | | 30,805 | | | |
| | $ | 3,075,520 | | | | | $ | 2,968,701 | | | | | $ | 2,610,092 | | | | | $ | 3,262,795 | | | |
The fair values of our cash equivalents, trade receivables and trade payables approximate their carrying values due to the short-term nature of these instruments.
Note 8 Commitments and Contingencies
Contingencies
Income Tax
We operate in a number of countries and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We do not recognize the benefit of income tax positions we believe are more likely than not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries, if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or if we lose a material tax dispute in any country, our effective tax rate on our worldwide earnings could change substantially.
In certain jurisdictions we have recognized deferred tax assets and liabilities. Judgment and assumptions are required in determining whether deferred tax assets will be fully or partially utilized. When we estimate that all or some portion of certain deferred tax assets such as net operating loss carryforwards will not be utilized, we establish a valuation allowance for the amount we determine to be more likely than not unrealizable. We continually evaluate strategies that could allow for future utilization of our deferred assets. Any change in the ability to utilize such deferred assets will be accounted for in the period of the event affecting the valuation allowance. If facts and circumstances cause
16
us to change our expectations regarding future tax consequences, the resulting adjustments could have a material effect on our financial results or cash flow. At this time, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize the deferred tax assets that we have recognized. However, it is possible that some of our recognized deferred tax assets, relating to net operating loss carryforwards, could expire unused or could carryforward indefinitely without utilization. Therefore, unless we are able to generate sufficient taxable income from our component operations, a substantial valuation allowance to reduce our deferred tax assets may be required, which would materially increase our tax expense in the period the allowance is recognized and materially adversely affect our results of operations and statement of financial condition.
15
Litigation
Nabors and its subsidiaries are defendants or otherwise involved in a number of lawsuits in the ordinary course of business. We estimate the range of our liability related to pending litigation when we believe the amount and range of loss can be estimated. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the lawsuits or claims. As additional information becomes available, we assess the potential liability related to our pending litigation and claims and revise our estimates. Due to uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ from our estimates. For matters where an unfavorable outcome is reasonably possible and significant, we disclose the nature of the matter and a range of potential exposure, unless an estimate cannot be made at the time of disclosure. In the opinion of management and based on liability accruals provided, our ultimate exposure with respect to these pending lawsuits and claims is not expected to have a material adverse effect on our consolidated financial position or cash flows, although they could have a material adverse effect on our results of operations for a particular reporting period.
In March 2011, the Court of Ouargla entered a judgment of approximately $20.7$19.8 million (at September 30, 2021March 31, 2022 exchange rates) against us relating to alleged violations of Algeria’s foreign currency exchange controls, which require that goods and services provided locally be invoiced and paid in local currency. The case relates to certain foreign currency payments made to us by CEPSA, a Spanish operator, for wells drilled in 2006. Approximately $7.5 million of the total contract amount was paid offshore in foreign currency, and approximately $3.2 million was paid in local currency. The judgment includes fines and penalties of approximately 4four times the amount at issue. We have appealed the ruling based on our understanding that the law in question applies only to resident entities incorporated under Algerian law. An intermediate court of appeals upheld the lower court’s ruling, and we appealed the matter to the Supreme Court. On September 25, 2014, the Supreme Court overturned the verdict against us, and the case was reheard by the Ouargla Court of Appeals on March 22, 2015 in light of the Supreme Court’s opinion. On March 29, 2015, the Ouargla Court of Appeals reinstated the initial judgment against us. We appealed this decision again to the Supreme Court, andwhich again overturned the Court has annulled the decision of the Ouargla Court of Appeals. Accordingly, theappeals court’s decision. The case was sentmoved back to the Courtcourt of Ouargla for further proceedings on October 10, 2021 consistent withappeals, which, once again, reinstated the verdict, failing to abide by the Supreme Court’s ruling. Accordingly, we are appealing once more to the Supreme Court to try to get a final ruling on the matter. While our payments were consistent with our historical operations in the country, and, we believe, those of other multinational corporations there, as well as interpretations of the law by the Central Bank of Algeria, the ultimate resolution of this matter could result in a loss of up to $12.7$11.8 million in excess of amounts accrued.
Following a routine audit conducted in May and June of 2018 by the Atyrau Oblast Ecology Department (the “AOED”), our joint venture in Kazakhstan, KMG Nabors Drilling Company (“KNDC”), was administratively fined for not having emissions permits for KNDC owned or leased equipment, due to a change in interpretation by the AOED that the owner/lessor of the equipment that emits the pollutants must have its own permits. Administrative fines of $0.8 million were paid by KNDC for such violations. AOED also assessed additional “environmental damages” in the amount of $3.4 million for the period. KNDC appealed and, ultimately, the Supreme Court ruled in KNDC’s favor on July 21, 2021, terminating the administrative case for lack of evidence. KNDC was reimbursed by the AOED for the environmental damages on December 27, 2021. With the potential for additional damages for later year audits, KNDC and the operator have executed an agreement formalizing the operator’s obligation to reimburse KNDC for many of the financial expenses related to this case as well as penalties and expenses related to future audit periods. Since 2019, KNDC holds its own permits. Another audit by AOED was performed for the second half of 2018, but KNDC continues to appeal this decision in the same manner as the prior audit. Meanwhile, KNDC received notice from government officials that certain of our employees may be held personally responsible, but considering the numerous court proceedings, the governmental officials temporarily suspended any criminal investigations. On December 10, 2021, the regional court in Atyrau Region upheld KNDC’s position and ruled in our favor. AOED still holds a right to appeal this decision to the Supreme Court until June 30, 2022, but it has canceled previously-issued audit decision that was the basis of the administrative proceeding. AOED also has an appeal pending for review of the environmental damages and has until the end of May 2022 to provide additional information to the court. AOED also carried out a planned audit for the period January 2019-February 2022 which had no material findings. We continue to be engaged and are monitoring the situation.
1716
Off-Balance Sheet Arrangements (Including Guarantees)
We are a party to some transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity and capital resources. The most significant of these off-balance sheet arrangements include the A/R Facility (see Note 4—Accounts Receivable Purchase and Sales Agreement)Agreements) and certain agreements and obligations under which we provide financial or performance assurance to third parties. Certain of these financial or performance assurances serve as guarantees, including standby letters of credit issued on behalf of insurance carriers in conjunction with our workers’ compensation insurance program and other financial surety instruments such as bonds. In addition, we have provided indemnifications, which serve as guarantees, to some third parties. These guarantees include indemnification provided by Nabors to our share transfer agent and our insurance carriers. We are not able to estimate the potential future maximum payments that might be due under our indemnification guarantees.
Management believes the likelihood that we would be required to perform or otherwise incur any material losses associated with any of these guarantees is remote. The following table summarizes the total maximum amount of financial guarantees issued by Nabors:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maximum Amount |
| | Maximum Amount |
| ||||||||||||||||||||
|
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
|
| 2022 |
| 2023 |
| 2024 |
| Thereafter |
| Total |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||||||||||||||
Financial standby letters of credit and other financial surety instruments | | $ | 45,889 |
| 140,828 |
| 112 |
| 50 | | $ | 186,879 | | | $ | 35,156 |
| 13,065 |
| 8,488 |
| 35,967 | | $ | 92,676 | |
Note 9 Earnings (Losses) Per Share
ASC 260, Earnings per Share, requires companies to treat unvested share-based payment awards that have nonforfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings (losses) per share. We have granted and expect to continue to grant to employees restricted stock grants that contain nonforfeitable rights to dividends. Such grants are considered participating securities under ASC 260. As such, we are required to include these grants in the calculation of our basic earnings (losses) per share and calculate basic earnings (losses) per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The participating security holders are not contractually obligated to share in losses. Therefore, losses are not allocated to the participating security holders.
Basic earnings (losses) per share is computed utilizing the two-class method and is calculated based on the weighted-average number of common shares outstanding during the periods presented.
Diluted earnings (losses) per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options and unvested restricted shares.
1817
A reconciliation of the numerators and denominators of the basic and diluted earnings (losses) per share computations is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | ||||||||||||
| |
| September 30, | | September 30, | | | | March 31, | | ||||||||||||
| |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |
| 2022 |
| 2021 |
| ||||||
| (In thousands, except per share amounts) | (In thousands, except per share amounts) | ||||||||||||||||||||
BASIC EPS: | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) (numerator): | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations, net of tax | | | $ | (115,702) | | $ | (146,682) | | $ | (434,434) | | $ | (658,919) | | | | $ | (174,668) | | $ | (128,329) | |
Less: net (income) loss attributable to noncontrolling interest | | |
| (6,778) | |
| (10,805) | |
| (21,168) | |
| (38,437) | | | |
| (9,828) | |
| (8,776) | |
Less: preferred stock dividends | | |
| — | |
| (3,653) | |
| (3,653) | |
| (10,958) | | | |
| — | |
| (3,653) | |
Less: accrued distribution on redeemable noncontrolling interest in subsidiary | | | | (2,356) | | | (4,353) | | | (7,088) | | | (13,092) | | | | | (2,545) | | | (2,402) | |
Less: distributed and undistributed earnings allocated to unvested shareholders | | | | — | | | — | | | — | | | (125) | | ||||||||
Numerator for basic earnings per share: | | | | | | | | | | | | | | | | | | | | | | |
Adjusted income (loss) from continuing operations, net of tax - basic | | | $ | (124,836) | | $ | (165,493) | | $ | (466,343) | | $ | (721,531) | | | | $ | (187,041) | | $ | (143,160) | |
Income (loss) from discontinued operations, net of tax | | | $ | (20) | | $ | 22 | | $ | 7 | | $ | (48) | | | | $ | — | | $ | 19 | |
| | | | | | | | | | | | | | | | | | | | | | |
Weighted-average number of shares outstanding - basic | | |
| 7,907 | |
| 7,064 | |
| 7,490 | |
| 7,056 | | | |
| 8,311 | |
| 7,102 | |
Earnings (losses) per share: | | | | | | | | | | | | | | | | | | | | | | |
Basic from continuing operations | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.25) | | | | $ | (22.51) | | $ | (20.16) | |
Basic from discontinued operations | | |
| — | |
| — | |
| — | |
| (0.01) | | | |
| — | |
| — | |
Total Basic | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.26) | | | | $ | (22.51) | | $ | (20.16) | |
DILUTED EPS: | | | | | | | | | | | | | | | | | | | | | | |
Adjusted income (loss) from continuing operations, net of tax - basic | | | $ | (124,836) | | $ | (165,493) | | $ | (466,343) | | $ | (721,531) | | ||||||||
Add: effect of reallocating undistributed earnings of unvested shareholders | | | | — | | | — | | | — | | | — | | ||||||||
Adjusted income (loss) from continuing operations, net of tax - diluted | | | $ | (124,836) | | $ | (165,493) | | $ | (466,343) | | $ | (721,531) | | | | $ | (187,041) | | $ | (143,160) | |
Income (loss) from discontinued operations, net of tax | | | $ | (20) | | $ | 22 | | $ | 7 | | $ | (48) | | | | $ | — | | $ | 19 | |
| | | | | | | | | | | | | | | | | | | | | | |
Weighted-average number of shares outstanding - basic | | |
| 7,907 | |
| 7,064 | |
| 7,490 | |
| 7,056 | | ||||||||
Add: dilutive effect of potential common shares | | | | — | | | — | | | — | | | — | | ||||||||
Weighted-average number of shares outstanding - diluted | | | | 7,907 | | | 7,064 | | | 7,490 | | | 7,056 | | | | | 8,311 | | | 7,102 | |
Earnings (losses) per share: | | | | | | | | | | | | | | | | | | | | | | |
Diluted from continuing operations | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.25) | | | | $ | (22.51) | | $ | (20.16) | |
Diluted from discontinued operations | | |
| — | |
| — | |
| — | |
| (0.01) | | | |
| — | |
| — | |
Total Diluted | | | $ | (15.79) | | $ | (23.42) | | $ | (62.26) | | $ | (102.26) | | | | $ | (22.51) | | $ | (20.16) | |
| | | | | | | | | | | | | | | | | | | | | | |
For all periods presented, the computation of diluted earnings (losses) per share excludes outstanding stock options with exercise prices greater than the average market price of Nabors’ common shares, because their inclusion would be anti-dilutive and because they are not considered participating securities. In any period during which the average market price of Nabors’ common shares exceeds the exercise prices of these stock options, such stock options will be included in our diluted earnings (losses) per share computation using the if-converted method of accounting. Restricted stock is included in our basic and diluted earnings (losses) per share computation using the two-class method of accounting in all periods because such stock is considered participating securities. For periods in which we experience a net loss from continuing operations, all potential common shares have been excluded from the calculation of weighted-average shares outstanding, because their inclusion would be anti-dilutive. The average number of shares from options that were excluded from diluted earnings (losses) per share that would potentially dilute earnings per share in the future were as follows:
19
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | ||||||||||||
| | | September 30, | | September 30, | | | | March 31, | | ||||||||||||
| | | 2021 |
| 2020 |
| 2021 |
| 2020 |
| |
| 2022 |
| 2021 |
| ||||||
| (In thousands) | |||||||||||||||||||||
Potentially dilutive securities excluded as anti-dilutive | | | | 22 | | | 36 | | | 33 | | | 57 | | | | | 13,194 | | | 72 | |
Additionally, through the first quarter of 2021, we excluded 0.79 million common shares from the computation of diluted shares issuable upon the conversion of mandatory convertible preferred shares, because their effect would be anti-dilutive under the if-converted method. Starting inFor the second quarter of 2021,three months ended March 31, 2022, we excluded 5.03.4 million shares from the computation of diluted shares related to the warrants issued because their effect would be anti-dilutive under the if-converted method.
18
Note 10 Impairments and Other Charges
The components of impairments and other charges are provided below:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
| | (in thousands) | ||||||||||
Goodwill impairments | | $ | — | | $ | — | | $ | — | | $ | 27,798 |
Intangible asset impairment | | | — | | | — | | | — | | | 83,625 |
US Drilling | | | — | | | — | | | — | | | 87,333 |
Canada Drilling | | | 545 | | | — | | | 58,545 | | | — |
International Drilling | | | — | | | 544 | | | 215 | | | 63,620 |
Drilling Solutions | | | — | | | (17) | | | — | | | 28,624 |
Rig Technologies | | | — | | | (182) | | | 418 | | | 2,526 |
Oil and gas related assets | | | — | | | — | | | — | | | 12,286 |
Severance and transaction related costs | | | 2,324 | | | 4,779 | | | 4,916 | | | 16,614 |
Other assets | | | 199 | | | (107) | | | 1,325 | | | 16,877 |
Total | | $ | 3,068 | | $ | 5,017 | | $ | 65,419 | | | 339,303 |
We review our assets for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the estimated undiscounted future cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to the extent the carrying amount of the long-lived asset exceeds its estimated fair value. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. The determination of future cash flows requires the estimation of utilization, dayrates, operating margins, sustaining capital and remaining economic life. Such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges.
For the three and nine months ended September 30, 2021
Canada Drilling
During the nine months ended September 30, 2021, we recognized an impairment of $58.5 million related to the sale of the Canada Drilling assets in July 2021.
Severance and transaction related costs
During the nine months ended September 30, 2021, we recognized charges of $4.9 million due to severance and reorganization costs due to ongoing cost cutting and consolidation measures that we enacted in response to the challenging industry environment.
20
For the three and nine months ended September 30, 2020
Goodwill impairments
We have historically performed our annual goodwill impairment test during the second quarter of each year. In addition to our annual impairment test, we are required to regularly assess whether a triggering event has occurred which would require interim impairment testing. Due to industry conditions during the first quarter of 2020 and the corresponding impact on future expectations of demand for our products and services, including the effect on our stock price, we determined a triggering event had occurred and performed a quantitative impairment assessment of our goodwill. Based on the results of our goodwill test performed, we recognized impairment charges to write off the remaining goodwill balances attributable to our Drilling Solutions and Rig Technologies operating segments of $11.4 million and $16.4 million, respectively.
Intangible asset impairments
We also reviewed our intangible assets for impairment in the first quarter of 2020 as a result of the industry conditions. The fair value of our intangible assets is determined using discounted cash flow models. Based on our updated projections of future cash flows, the fair value of our intangible assets did not support the carrying value. As such, we recognized an impairment of $83.6 million to write off all remaining intangible assets attributable to our Drilling Solutions and Rig Technologies operating segments.
US Drilling
Due to the sharp decline in activity as a result of industry conditions in the US in the first part of the year relative to the same period in the prior year, we recorded impairments of $33.3 million and functionally retired $54.0 million of our lower specification rigs in the Lower 48 and Alaska markets totaling approximately $87.3 million. We determined that the assets were either functionally obsolete, would be no longer used, or the carrying value was not fully recoverable and was in excess of its fair value.
International Drilling
We impaired $30.5 million during the three months ended March 31, 2020, which represented rig and drilling-related equipment in international markets which have been impacted by market conditions and other factors.
During the second quarter of 2020, we wrote off all the remaining value on our rig and drilling-related equipment in Venezuela due to our lack of work in the country and limited visibility to any possibility of further work. This resulted in a charge of $32.6 million.
Drilling Solutions
We impaired or retired $28.6 million of fixed assets, equipment and inventory in our Drilling Solutions segment as a result of the significant decline in utilization experienced over the first half of the year due to industry conditions. We determined that the assets were either functionally obsolete, would be no longer used, or the carrying value was not fully recoverable and was in excess of its fair value.
Rig Technologies
As a result of our periodic analysis on inventories for our Rig Technologies segment, we recorded a $2.5 million provision for obsolescence.
21
Oil & gas related assets
In the first quarter of 2020, we recognized an impairment of $12.3 million to various assets related to our retained interest in the oil and gas properties located on the North Slope of Alaska.
Severance and transaction related costs
During the nine months ended September 30, 2020, we recognized charges of $16.6 million due to severance and other related costs incurred to right-size our cost structure.
Other assets
We wrote down or provided for $16.9 million of certain other assets including receivables related to our operations. The charges were primarily attributable to markets which have been adversely impacted by foreign sanctions or other political risk issues as well as bankruptcies or other financial problems.
Note 1110 Supplemental Balance Sheet and Income Statement Information
Accrued liabilities included the following:
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | March 31, | | December 31, | | ||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||
Accrued compensation | | $ | 66,706 | | $ | 82,462 | | | $ | 52,181 | | $ | 51,993 | |
Deferred revenue and proceeds on insurance and asset sales | |
| 63,824 | | | 61,473 | | |
| 44,970 | | | 59,816 | |
Other taxes payable | |
| 31,870 | | | 28,602 | | |
| 26,783 | | | 34,333 | |
Workers’ compensation liabilities | |
| 7,788 | |
| 7,788 | | |
| 6,588 | |
| 6,588 | |
Interest payable | |
| 40,340 | |
| 62,935 | | |
| 55,779 | |
| 71,814 | |
Litigation reserves | |
| 14,676 | |
| 13,976 | | |
| 16,270 | |
| 14,939 | |
Dividends declared and payable | |
| — | |
| 3,653 | | |||||||
Other accrued liabilities | |
| 10,152 | |
| 15,196 | | |
| 7,339 | |
| 7,688 | |
| | $ | 235,356 | | $ | 276,085 | | | $ | 209,910 | | $ | 247,171 | |
Investment income (loss) includes the following:
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | ||||||||||||
|
| September 30, | | September 30, | | | March 31, | | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||||
| | (In thousands) | | | (In thousands) | | ||||||||||||||
Interest and dividend income | | $ | 211 | | $ | 177 | | $ | 1,214 | | $ | 3,781 | | | $ | 397 | | $ | 1,293 | |
Gains (losses) on marketable securities | |
| (11) | |
| (919) | |
| 187 | |
| (5,685) | | |
| (234) | |
| (30) | |
| | $ | 200 | | $ | (742) | | $ | 1,401 | | $ | (1,904) | | | $ | 163 | | $ | 1,263 | |
Other, net included the following:
| | | | | | | | |
| | | Three Months Ended | | ||||
| | | March 31, | | ||||
| |
| 2022 |
| 2021 |
| ||
| (In thousands) | |||||||
Losses (gains) on sales, disposals and involuntary conversions of long-lived assets | | | $ | 76 | | $ | 8,522 | |
Warrant valuation | | | | 73,202 | | | — | |
Litigation expenses and reserves | | | | 3,112 | | | 1,494 | |
Foreign currency transaction losses (gains) | | | | 4,214 | | | 2,379 | |
(Gain) loss on debt buyback | | | | 36 | | | (8,062) | |
Other losses (gains) | | | | (239) | | | 3,013 | |
| | | $ | 80,401 | | $ | 7,346 | |
The changes in accumulated other comprehensive income (loss), by component, included the following:
| | | | | | | | | | | | | |
|
| | |
| | |
| | |
| | |
|
| | Gains | | Defined | | | | | | |
| ||
| | (losses) on | | benefit | | Foreign | | | |
| |||
| | cash flow | | pension plan | | currency | | | |
| |||
|
| hedges |
| items |
| items |
| Total |
| ||||
| | (In thousands (1) ) |
| ||||||||||
As of January 1, 2021 | | $ | 2 | | $ | (3,616) | | $ | (7,510) | | $ | (11,124) | |
Other comprehensive income (loss) before reclassifications | |
| — | | | (1,900) | |
| 2,228 | | | 328 | |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| — | | | 40 | | | — | | | 40 | |
Net other comprehensive income (loss) | |
| — | |
| (1,860) | |
| 2,228 | |
| 368 | |
As of March 31, 2021 | | $ | 2 | | $ | (5,476) | | $ | (5,282) | | $ | (10,756) | |
(1) | All amounts are net of tax. |
2219
| | | | | | | | | | | | | |
|
| | |
| | |
| | |
| | |
|
| | Gains | | Defined | | | | | | |
| ||
| | (losses) on | | benefit | | Foreign | | | |
| |||
| | cash flow | | pension plan | | currency | | | |
| |||
|
| hedges |
| items |
| items |
| Total |
| ||||
| | (In thousands (1) ) |
| ||||||||||
As of January 1, 2022 | | $ | 2 | | $ | (5,356) | | $ | (5,280) | | $ | (10,634) | |
Other comprehensive income (loss) before reclassifications | |
| — | |
| 1,428 | |
| (132) | |
| 1,296 | |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| — | |
| 40 | |
| — | |
| 40 | |
Net other comprehensive income (loss) | |
| — | |
| 1,468 | |
| (132) | |
| 1,336 | |
As of March 31, 2022 | | $ | 2 | | $ | (3,888) | | $ | (5,412) | | $ | (9,298) | |
(1) | All amounts are net of tax. |
The line items that were reclassified to net income included the following:
| | | | | | | | |
| | | Three Months Ended | | ||||
| | | March 31, | | ||||
| |
| 2022 |
| 2021 |
| ||
| (In thousands) | |||||||
General and administrative expenses | | | $ | 52 | | $ | 52 | |
Total income (loss) from continuing operations before income tax | | |
| (52) | |
| (52) | |
Tax expense (benefit) | | | | (12) | | | (12) | |
Reclassification adjustment for (gains)/ losses included in net income (loss) | | | $ | (40) | | $ | (40) | |
Other, net included the following:
| | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | ||||||||
| |
| September 30, | | September 30, | | ||||||||
| |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
| (In thousands) | |||||||||||||
Losses (gains) on sales, disposals and involuntary conversions of long-lived assets | | | $ | (168) | | $ | 3,324 | | $ | 17,320 | | $ | 5,752 | |
Purchase of technology | | | | 14,733 | | | — | | | 14,733 | | | — | |
Litigation expenses and reserves | | |
| 2,603 | | | 621 | | | 5,944 | | | 2,733 | |
Foreign currency transaction losses (gains) | | |
| 867 | | | 9,295 | | | 3,394 | | | 11,377 | |
(Gain) loss on debt buyback | | | | (2,521) | | | (14,170) | | | (10,706) | | | (65,848) | |
Other losses (gains) | | |
| 4,176 | | | 505 | | | 455 | | | (2,344) | |
| | | $ | 19,690 | | $ | (425) | | $ | 31,140 | | $ | (48,330) | |
The changes in accumulated other comprehensive income (loss), by component, included the following:
| | | | | | | | | | | | | |
|
| | |
| | |
| | |
| | |
|
| | Gains | | Defined | | | | | | |
| ||
| | (losses) on | | benefit | | Foreign | | | |
| |||
| | cash flow | | pension plan | | currency | | | |
| |||
|
| hedges |
| items |
| items |
| Total |
| ||||
| | (In thousands (1) ) |
| ||||||||||
As of January 1, 2020 | | $ | (65) | | $ | (3,778) | | $ | (7,945) | | $ | (11,788) | |
Other comprehensive income (loss) before reclassifications | |
| — | | | — | |
| (7,029) | | | (7,029) | |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| 67 | | | 120 | | | — | | | 187 | |
Net other comprehensive income (loss) | |
| 67 | |
| 120 | |
| (7,029) | |
| (6,842) | |
As of September 30, 2020 | | $ | 2 | | $ | (3,658) | | $ | (14,974) | | $ | (18,630) | |
| | | | | | | | | | | | | |
|
| | |
| | |
| | |
| | |
|
| | Gains | | Defined | | | | | | |
| ||
| | (losses) on | | benefit | | Foreign | | | |
| |||
| | cash flow | | pension plan | | currency | | | |
| |||
|
| hedges |
| items |
| items |
| Total |
| ||||
| | (In thousands (1) ) |
| ||||||||||
As of January 1, 2021 | | $ | 2 | | $ | (3,616) | | $ | (7,510) | | $ | (11,124) | |
Other comprehensive income (loss) before reclassifications | |
| — | |
| (1,900) | |
| 2,032 | |
| 132 | |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| — | |
| 120 | |
| — | |
| 120 | |
Net other comprehensive income (loss) | |
| — | |
| (1,780) | |
| 2,032 | |
| 252 | |
As of September 30, 2021 | | $ | 2 | | $ | (5,396) | | $ | (5,478) | | $ | (10,872) | |
The line items that were reclassified to net income included the following:
| | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | ||||||||
| |
| September 30, | | September 30, | | ||||||||
| |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
| (In thousands) | |||||||||||||
Interest expense | | | $ | — | | $ | (124) | | $ | — | | $ | 160 | |
General and administrative expenses | | |
| 52 | |
| 52 | |
| 156 | |
| 156 | |
Total income (loss) from continuing operations before income tax | | |
| (52) | |
| 72 | |
| (156) | |
| (316) | |
Tax expense (benefit) | | | | (12) | | | (35) | | | (36) | | | (129) | |
Reclassification adjustment for (gains)/ losses included in net income (loss) | | | $ | (40) | | $ | 107 | | $ | (120) | | $ | (187) | |
23
Note 1211 Segment Information
The following table sets forth financial information with respect to our reportable operating segments:
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | ||||||||||||
| |
| September 30, | | September 30, | | | | March 31, | | ||||||||||||
| |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |
| 2022 |
| 2021 |
| ||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||
Operating revenues: | | | | | | | | | | | | | | | | | | | | | | |
U.S. Drilling | | | $ | 173,441 | | $ | 130,243 | | $ | 477,346 | | $ | 578,928 | | | | $ | 217,583 | | $ | 142,299 | |
Canada Drilling | | |
| 6,034 | |
| 10,774 | |
| 39,336 | |
| 39,929 | | | |
| — | |
| 20,989 | |
International Drilling | | |
| 270,008 | |
| 248,392 | |
| 772,128 | |
| 886,580 | | | |
| 279,030 | |
| 246,838 | |
Drilling Solutions | | |
| 45,880 | |
| 29,324 | |
| 120,697 | |
| 117,837 | | | |
| 54,182 | |
| 35,706 | |
Rig Technologies | | |
| 42,053 | |
| 28,466 | |
| 102,353 | |
| 104,198 | | | |
| 36,736 | |
| 25,748 | |
Other reconciling items (1) | | |
| (13,251) | |
| (8,847) | |
| (37,851) | |
| (36,825) | | | |
| (18,992) | |
| (11,069) | |
Total | | | $ | 524,165 | | $ | 438,352 | | $ | 1,474,009 | | $ | 1,690,647 | | | | $ | 568,539 | | $ | 460,511 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | ||||||||||||
| |
| September 30, | | September 30, | | | | March 31, | | ||||||||||||
| |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |
| 2022 |
| 2021 |
| ||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||
Adjusted operating income (loss): (2) | | | | | | | | | | | | | | | | | | | | | | |
U.S. Drilling | | | $ | (19,700) | | $ | (39,162) | | $ | (63,905) | | $ | (69,961) | | | | $ | (5,851) | | $ | (23,336) | |
Canada Drilling | | |
| 1,371 | |
| (3,507) | |
| 2,670 | |
| (9,265) | | | |
| (19) | |
| 3,907 | |
International Drilling | | |
| (7,297) | |
| (16,872) | |
| (34,368) | |
| (20,743) | | | |
| (6,327) | |
| (18,632) | |
Drilling Solutions | | |
| 8,607 | |
| (3,583) | |
| 19,841 | |
| 8,699 | | | |
| 14,709 | |
| 4,710 | |
Rig Technologies | | |
| 1,926 | |
| (1,807) | |
| (1,335) | |
| (11,450) | | | |
| (2,751) | |
| (2,569) | |
Total segment adjusted operating income (loss) | | | $ | (15,093) | | $ | (64,931) | | $ | (77,097) | | $ | (102,720) | | | | $ | (239) | | $ | (35,920) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | ||||||||
| |
| September 30, | | September 30, | | ||||||||
| |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
| (In thousands) | |||||||||||||
Reconciliation of segment adjusted operating income (loss) to net income (loss) from continuing operations before income taxes: | | | | | | | | | | | | | | |
Total segment adjusted operating income (loss) (2) | | | $ | (15,093) | | $ | (64,931) | | $ | (77,097) | | $ | (102,720) | |
Other reconciling items (3) | | |
| (33,050) | |
| (27,709) | |
| (98,045) | |
| (86,547) | |
Investment income (loss) | | |
| 200 | | | (742) | |
| 1,401 | | | (1,904) | |
Interest expense | | | | (42,217) | | | (52,403) | | | (126,906) | | | (158,331) | |
Impairments and other charges | | | | (3,068) | | | (5,017) | | | (65,419) | | | (339,303) | |
Other, net | | | | (19,690) | | | 425 | | | (31,140) | | | 48,330 | |
Income (loss) from continuing operations before income taxes | | | $ | (112,918) | | $ | (150,377) | | $ | (397,206) | | $ | (640,475) | |
20
| | | | | | | | |
| | | Three Months Ended | | ||||
| | | March 31, | | ||||
| |
| 2022 |
| 2021 |
| ||
| (In thousands) | |||||||
Reconciliation of segment adjusted operating income (loss) to net income (loss): | | | | | | | | |
Net income (loss) | | | $ | (174,668) | | $ | (128,310) | |
Income (loss) from discontinued operations, net of tax | | | | — | | | (19) | |
Income (loss) from continuing operations, net of tax | | | | (174,668) | | | (128,329) | |
Income tax expense (benefit) | | | | 13,671 | | | 9,725 | |
Income (loss) from continuing operations before income taxes | | | | (160,997) | | $ | (118,604) | |
Investment (income) loss | | |
| (163) | | | (1,263) | |
Interest expense | | | | 46,910 | | | 42,975 | |
Other, net | | | | 80,401 | | | 7,346 | |
Other reconciling items (3) | | |
| 33,610 | |
| 33,626 | |
Total segment adjusted operating income (loss) (2) | | | $ | (239) | | $ | (35,920) | |
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | March 31, | | December 31, | | ||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||
Total assets: | | | | | | | | | | | | | | |
U.S. Drilling | | $ | 1,675,517 | | $ | 1,871,008 | | | $ | 1,540,980 | | $ | 1,606,683 | |
Canada Drilling | |
| 11,468 | |
| 174,123 | | |
| 529 | |
| 1,392 | |
International Drilling | |
| 2,442,054 | |
| 2,688,912 | | |
| 2,343,972 | |
| 2,380,703 | |
Drilling Solutions | |
| 76,041 | |
| 100,278 | | |
| 66,696 | |
| 65,899 | |
Rig Technologies | |
| 200,814 | |
| 225,954 | | |
| 184,372 | |
| 190,489 | |
Other reconciling items (3) | |
| 768,932 | |
| 443,153 | | |
| 720,617 | |
| 1,280,198 | |
Total | | $ | 5,174,826 | | $ | 5,503,428 | | | $ | 4,857,166 | | $ | 5,525,364 | |
(1) | Represents the elimination of inter-segment transactions related to our Rig Technologies operating segment. |
24
(2) | 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. Management evaluates the performance of our operating segments using adjusted operating income (loss), which is a segment performance measure, because it believes that this financial measure reflects 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. A reconciliation |
(3) | Represents the elimination of inter-segment transactions and unallocated corporate expenses and assets. |
Note 1312 Revenue Recognition
We recognize revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. Contract drilling revenues are recorded over time utilizing the input method based on time elapsed. The measurement of progress considers the transfer of the service to the customer as we provide daily drilling services. We receive payment after the services have been performed by billing customers periodically (typically monthly). However, a portion of our revenues are recognized at a point-in-time as control is transferred at a distinct point in time such as with the sale of our top drives and other capital equipment. Within our drilling contracts, we have identified one performance obligation in which the transaction price is allocated.
Disaggregation of revenue
In the following table, revenue is disaggregated by geographical region. The table also includes a reconciliation of the disaggregated revenue with the reportable segments:
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |||||||||||||||||||
|
| September 30, 2021 | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | U.S. Drilling | | | Canada Drilling | | | International Drilling | | | Drilling Solutions | | | Rig Technologies | | | Other | | | Total | |
| | (In thousands) | | |||||||||||||||||||
Lower 48 | | $ | 132,639 | | $ | — | | $ | — | | $ | 26,917 | | $ | 17,040 | | $ | — | | $ | 176,596 | |
U.S. Offshore Gulf of Mexico | |
| 35,063 | |
| — | |
| — | |
| 1,634 | |
| — | |
| — | | | 36,697 | |
Alaska | |
| 5,739 | |
| — | |
| — | |
| 163 | |
| 1 | |
| — | | | 5,903 | |
Canada | |
| — | |
| 6,034 | |
| — | |
| 340 | |
| 1,046 | |
| — | | | 7,420 | |
Middle East & Asia | |
| — | |
| — | |
| 179,617 | |
| 10,872 | |
| 20,678 | |
| — | | | 211,167 | |
Latin America | |
| — | |
| — | |
| 70,692 | |
| 5,564 | |
| — | |
| — | | | 76,256 | |
Europe, Africa & CIS | |
| — | |
| — | |
| 19,699 | |
| 390 | |
| 3,288 | |
| — | | | 23,377 | |
Eliminations & other | |
| — | | | — | | | — | | | — | | | — | | | (13,251) | |
| (13,251) | |
Total | | $ | 173,441 | | $ | 6,034 | | $ | 270,008 | | $ | 45,880 | | $ | 42,053 | | $ | (13,251) | | $ | 524,165 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | |||||||||||||||||||
|
| September 30, 2021 | | |||||||||||||||||||
| | | U.S. Drilling | | | Canada Drilling | | | International Drilling | | | Drilling Solutions | | | Rig Technologies | | | Other | | | Total | |
| | (In thousands) | | |||||||||||||||||||
Lower 48 | | $ | 363,536 | | $ | — | | $ | — | | $ | 66,801 | | $ | 45,025 | | $ | — | | $ | 475,362 | |
U.S. Offshore Gulf of Mexico | |
| 95,222 | |
| — | |
| — | |
| 6,192 | |
| — | |
| — | | | 101,414 | |
Alaska | |
| 18,588 | |
| — | |
| — | |
| 484 | |
| 14 | |
| — | | | 19,086 | |
Canada | |
| — | |
| 39,336 | |
| — | |
| 998 | |
| 3,329 | |
| — | | | 43,663 | |
Middle East & Asia | |
| — | |
| — | |
| 522,142 | |
| 29,320 | |
| 43,334 | |
| — | | | 594,796 | |
Latin America | |
| — | |
| — | |
| 184,531 | |
| 15,788 | |
| 176 | |
| — | | | 200,495 | |
Europe, Africa & CIS | |
| — | |
| — | |
| 65,455 | |
| 1,114 | |
| 10,475 | |
| — | | | 77,044 | |
Eliminations & other | |
| — | | | — | | | — | | | — | | | — | | | (37,851) | |
| (37,851) | |
Total | | $ | 477,346 | | $ | 39,336 | | $ | 772,128 | | $ | 120,697 | | $ | 102,353 | | $ | (37,851) | | $ | 1,474,009 | |
2521
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |||||||||||||||||||
|
| September 30, 2020 | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | U.S. Drilling | | | Canada Drilling | | | International Drilling | | | Drilling Solutions | | | Rig Technologies | | | Other | | | Total | |
| | (In thousands) | | |||||||||||||||||||
Lower 48 | | $ | 96,433 | | $ | — | | $ | — | | $ | 15,769 | | $ | 10,220 | | $ | — | | $ | 122,422 | |
U.S. Offshore Gulf of Mexico | |
| 26,943 | |
| — | |
| — | |
| 2,011 | |
| — | |
| — | | | 28,954 | |
Alaska | |
| 6,867 | |
| — | |
| — | |
| 66 | |
| 2 | |
| — | | | 6,935 | |
Canada | |
| — | |
| 10,774 | |
| — | |
| 187 | |
| 515 | |
| — | | | 11,476 | |
Middle East & Asia | |
| — | |
| — | |
| 176,617 | |
| 10,096 | |
| 13,869 | |
| — | | | 200,582 | |
Latin America | |
| — | |
| — | |
| 43,881 | |
| 902 | |
| 15 | |
| — | | | 44,798 | |
Europe, Africa & CIS | |
| — | |
| — | |
| 27,894 | |
| 293 | |
| 3,845 | |
| — | | | 32,032 | |
Eliminations & other | |
| — | | | — | | | — | | | — | | | — | | | (8,847) | |
| (8,847) | |
Total | | $ | 130,243 | | $ | 10,774 | | $ | 248,392 | | $ | 29,324 | | $ | 28,466 | | $ | (8,847) | | $ | 438,352 | |
Disaggregation of revenue
| | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | |||||||||||||||||||
|
| September 30, 2020 | |||||||||||||||||||
| | | U.S. Drilling | | | Canada Drilling | | | International Drilling | | | Drilling Solutions | | | Rig Technologies | | | Other | | | Total |
| | (In thousands) | |||||||||||||||||||
Lower 48 | | $ | 445,478 | | $ | — | | $ | — | | $ | 70,805 | | $ | 42,860 | | $ | — | | $ | 559,143 |
U.S. Offshore Gulf of Mexico | |
| 102,681 | |
| — | |
| — | |
| 7,044 | |
| — | |
| — | | | 109,725 |
Alaska | |
| 30,769 | |
| — | |
| — | |
| 1,296 | |
| 20 | |
| — | | | 32,085 |
Canada | |
| — | |
| 39,929 | |
| — | |
| 995 | |
| 2,711 | |
| — | | | 43,635 |
Middle East & Asia | |
| — | |
| — | |
| 571,108 | |
| 31,630 | |
| 46,003 | |
| — | | | 648,741 |
Latin America | |
| — | |
| — | |
| 177,800 | |
| 4,284 | |
| 136 | |
| — | | | 182,220 |
Europe, Africa & CIS | |
| — | |
| — | |
| 137,672 | |
| 1,783 | |
| 12,468 | |
| — | | | 151,923 |
Eliminations & other | |
| — | | | — | | | — | | | — | | | — | | | (36,825) | |
| (36,825) |
Total | | $ | 578,928 | | $ | 39,929 | | $ | 886,580 | | $ | 117,837 | | $ | 104,198 | | $ | (36,825) | | $ | 1,690,647 |
In the following table, revenue is disaggregated by geographical region. The table also includes a reconciliation of the disaggregated revenue with the reportable segments:
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |||||||||||||||||||
|
| March 31, 2022 | | |||||||||||||||||||
| | | U.S. Drilling | | | Canada Drilling | | | International Drilling | | | Drilling Solutions | | | Rig Technologies | | | Other | | | Total | |
| | (In thousands) | | |||||||||||||||||||
Lower 48 | | $ | 172,797 | | $ | — | | $ | — | | $ | 34,060 | | $ | 22,688 | | $ | — | | $ | 229,545 | |
U.S. Offshore Gulf of Mexico | |
| 30,440 | |
| — | |
| — | |
| 3,236 | |
| — | |
| — | | | 33,676 | |
Alaska | |
| 14,346 | |
| — | |
| — | |
| 276 | |
| — | |
| — | | | 14,622 | |
Canada | |
| — | |
| — | |
| — | |
| 436 | |
| 979 | |
| — | | | 1,415 | |
Middle East & Asia | |
| — | |
| — | |
| 190,696 | |
| 10,026 | |
| 10,800 | |
| — | | | 211,522 | |
Latin America | |
| — | |
| — | |
| 68,895 | |
| 5,929 | |
| — | |
| — | | | 74,824 | |
Europe, Africa & CIS | |
| — | |
| — | |
| 19,439 | |
| 219 | |
| 2,269 | |
| — | | | 21,927 | |
Eliminations & other | |
| — | | | — | | | — | | | — | | | — | | | (18,992) | |
| (18,992) | |
Total | | $ | 217,583 | | $ | — | | $ | 279,030 | | $ | 54,182 | | $ | 36,736 | | $ | (18,992) | | $ | 568,539 | |
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | |||||||||||||||||||
|
| March 31, 2021 | |||||||||||||||||||
| | | U.S. Drilling | | | Canada Drilling | | | International Drilling | | | Drilling Solutions | | | Rig Technologies | | | Other | | | Total |
| | (In thousands) | |||||||||||||||||||
Lower 48 | | $ | 109,534 | | $ | — | | $ | — | | $ | 18,448 | | $ | 12,539 | | $ | — | | $ | 140,521 |
U.S. Offshore Gulf of Mexico | |
| 27,193 | |
| — | |
| — | |
| 2,736 | |
| — | |
| — | | | 29,929 |
Alaska | |
| 5,572 | |
| — | |
| — | |
| 136 | |
| — | |
| — | | | 5,708 |
Canada | |
| — | |
| 20,989 | |
| — | |
| 454 | |
| 900 | |
| — | | | 22,343 |
Middle East & Asia | |
| — | |
| — | |
| 168,187 | |
| 8,991 | |
| 9,078 | |
| — | | | 186,256 |
Latin America | |
| — | |
| — | |
| 55,908 | |
| 4,567 | |
| 12 | |
| — | | | 60,487 |
Europe, Africa & CIS | |
| — | |
| — | |
| 22,743 | |
| 374 | |
| 3,219 | |
| — | | | 26,336 |
Eliminations & other | |
| — | | | — | | | — | | | — | | | — | | | (11,069) | |
| (11,069) |
Total | | $ | 142,299 | | $ | 20,989 | | $ | 246,838 | | $ | 35,706 | | $ | 25,748 | | $ | (11,069) | | $ | 460,511 |
Contract balances
We perform our obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. We recognize a contract asset or liability when we transfer goods or services to a customer and bill an amount which differs from the revenue allocated to the related performance obligations.
The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on our condensed consolidated balance sheet. In general, we receive payments from customers based on dayrates as stipulated in our contracts (i.e.(e.g., operating rate, standby rate). The invoices billed to the customer are based on the varying rates applicable to the operating status on each rig. Accounts receivable are recorded when the right to consideration becomes unconditional.
Dayrate contracts also may contain fees charged to the customer for up-front rig modifications, mobilization and demobilization of equipment and personnel. These fees are associated with contract fulfillment activities, and the related revenue (subject to any constraint on estimates of variable consideration) is allocated to a single performance obligation and recognized ratably over the initial term of the contract. Mobilization fees are generally billable to the customer in the initial phase of a contract and generate contract liabilities until they are recognized as revenue. Demobilization fees are generally received at the end of the contract and generate contract assets when they are recognized as revenue prior to becoming receivables from the customer.
We receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request. Reimbursable revenues are variable and subject to uncertainty as the amounts received and timing thereof are dependent on factors outside of our influence. Accordingly, these revenues are constrained and not recognized until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of the customer. We are generally considered a principal in these transactions and record the associated revenues at the gross amounts billed to the customer.
2622
The opening and closing balances of our receivables, contract assets and current and long-term contract liabilities are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Contract | | Contract | | Contract | | Contract | | | | Contract | | Contract | | Contract | | Contract | ||||||||||
| | Contract | | Assets | | Assets | | Liabilities | | Liabilities | | Contract | | Assets | | Assets | | Liabilities | | Liabilities | ||||||||||
|
| Receivables |
| (Current) |
| (Long-term) |
| (Current) |
| (Long-term) |
| Receivables |
| (Current) |
| (Long-term) |
| (Current) |
| (Long-term) | ||||||||||
| | (In millions) | | (In millions) | ||||||||||||||||||||||||||
As of December 31, 2020 | | $ | 427.2 | | $ | 23.5 | | $ | 6.8 | | $ | 42.8 | | $ | 44.2 | |||||||||||||||
As of September 30, 2021 | | $ | 342.4 | | $ | 26.2 | | $ | 3.1 | | $ | 45.5 | | $ | 30.5 | |||||||||||||||
As of December 31, 2021 | | $ | 350.0 | | $ | 24.9 | | $ | 1.9 | | $ | 42.9 | | $ | 29.3 | |||||||||||||||
As of March 31, 2022 | | $ | 385.6 | | $ | 27.5 | | $ | 1.9 | | $ | 34.4 | | $ | 27.8 |
Approximately 42%37% of the contract liability balance at the beginning of the period is expected to be recognized as revenue during 20212022, of which 24%10% was recognized during the ninethree months ended September 30, 2021,March 31, 2022, and 16%28% is expected to be recognized during 20222023. The remaining 42%35% of the contract liability balance at the beginning of the period is expected to be recognized as revenue during 20232024 or thereafter.
Additionally, 74%88% of the contract asset balance at the beginning of the period is expected to be recognized as expense during 2021,2022, of which 59%46% was recognized during the ninethree months ended September 30, 2021,March 31, 2022, and 23%12% is expected to be recognized during 2022. The remaining 3% of the contract asset balance at the beginning of the period is expected to be recognized as expense during 2023 or thereafter.2023. This disclosure does not include variable consideration allocated entirely to a wholly unsatisfied performance obligation or promise to transfer a distinct good or service that forms part of a single performance obligation.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We often discuss expectations regarding our future markets, demand for our products and services, and our performance in our annual, quarterly and current reports, press releases, and other written and oral statements. Statements relating to matters that are not historical facts are “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These “forward-looking statements” are based on an analysis of currently available competitive, financial and economic data and our operating plans. They are inherently uncertain and investors should recognize that events and actual results could turn out to be significantly different from our expectations. By way of illustration, when used in this document, words such as “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “will,” “should,” “could,” “may,” “predict” and similar expressions are intended to identify forward-looking statements.
You should consider the following key factors when evaluating these forward-looking statements:
● | actual and potential political or economic instability, civil disturbance, war or acts of terrorism involving any of the countries in which we do business; |
● | the novel coronavirus (“COVID-19”) pandemic and its impact on our operations as well as oil and gas markets and prices; |
● | fluctuations and volatility in worldwide prices of and demand for oil and natural gas; |
● | fluctuations in levels of oil and natural gas exploration and development activities; |
● | fluctuations in the demand for our services; |
● | competitive and technological changes and other developments in the oil and gas and oilfield services industries; |
● | our ability to renew customer contracts in order to maintain competitiveness; |
● | the existence of operating risks inherent in the oil and gas and oilfield services industries; |
● | the possibility of the loss of one or a number of our large customers; |
● | the impact of long-term indebtedness and other financial commitments on our financial and operating flexibility; |
● | our access to and the cost of capital, including the impact of a further downgrade in our credit rating, covenant restrictions, availability under our secured revolving credit facility, and future issuances of debt or equity securities; |
● | our dependence on our operating subsidiaries and investments to meet our financial obligations; |
● | our ability to retain skilled employees; |
● | our ability to complete, and realize the expected benefits of, strategic transactions; |
● | changes in tax laws and the possibility of changes in other laws and regulations; |
● | the possibility of |
● | general economic conditions, including the capital and credit markets. |
Our business depends, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Therefore, a sustained increase or decrease in the price of oil or natural gas, that
2824
has a material impact on exploration, development and production activities, could also materially affect our financial position, results of operations and cash flows.
The above description of risks and uncertainties is by no means all-inclusive but highlights certain factors that we believe are important for your consideration. For a more detailed description of risk factors that may affect us or our industry, please refer to Item 1A. — Risk Factors in our 20202021 Annual Report and Part II, Item 1A. — Risk Factors in this report.Report.
Management Overview
This section is intended to help you understand our results of operations and our financial condition. This information is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes thereto.
We are a leading provider of advanced technology for the energy industry. With operations in approximately 20over 15 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and sustainable energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower carbon world.
Outlook
The demand for our productsservices and servicesproducts is a function of the level of spending by oil and gas companies for exploration, development and production activities. The level of exploration, development and production activities is to a large extent tied to the prices of oil and natural gas, which can fluctuate significantly, are highly volatile and tend to be highly sensitive to supply and demand cycles. Additionally, some oil and gas companies may intentionally limit their capital spending to a percentage of their operating cash flows which may differ from how they have historically made capital allocation decisions.
During 2020, the oil markets experienced unprecedented volatility. The COVID-19 outbreak, and its development into a pandemic, along with policies and actions taken by governments and behaviors of companies and behaviors of customers around the world, had a significant negative impact on demand for oil and gas and by extension our services, which negatively impacted our operating results and cash flow.flow throughout 2020 and into 2021. The Lower-48 drilling rig market began to stabilize during the second half of 2020.2020 and continued to improve at a measured rate throughout 2021. We expect continued measured but steady increases in activity throughout the remainder of 20212022 for the Lower-48 market. Our International markets have also experienced factors and conditions that led to similar reductions in activity throughout 2020, but the impact has varied considerably from country to country. Since 2020, we have seen a substantial resumption of activity to near pre-COVID-19 levels. As government-imposed restrictions continue to ease, we expect our international activity to generally increase through the remainder of the year.
More recently, several global commodity markets, including oil and gas, have been impacted by the effects of the war in Ukraine. These consequences include severe economic sanctions against the Russian government as well as certain Russian businesses and individuals, in addition to a reorientation of the global sources of oil and gas supply and a significant increase in the related commodity prices. While higher commodity prices have historically led to an increase in oilfield activity, the ultimate outcome of these events and the impact on our business remains uncertain.
Recent Developments
Common stock warrants2022 Credit Agreement
On May 27, 2021,January 21, 2022, we entered into a revolving credit agreement between Nabors Delaware, the Board declaredguarantors from time to time party thereto, the issuing banks (the “Issuing Banks”) and other lenders party thereto (the “Lenders”) and Citibank, N.A., as administrative agent (the “2022 Credit Agreement”). The 2022 Credit Agreement replaced the 2018 Revolving Credit Facility. Under the 2022 Credit Agreement, the Lenders have committed to provide up to an aggregate principal amount at any time outstanding not in excess of $350.0 million (with an accordion feature for an additional $100.0 million) to Nabors Delaware under a distribution to holderssecured revolving credit facility, including sub-facilities provided by certain of the Company’s common sharesLenders for letters of warrants to purchase its common shares (the “Warrants”). Holderscredit in an aggregate principal amount at any time outstanding not in excess of Nabors common shares received two-fifths$100.0 million. The facility matures on the earlier of a warrant per common share held as of the record date (rounded down for any fractional warrant). Nabors issued approximately 3.2 million warrants on June 11, 2021 to shareholders of record as of June 4, 2021.
Each Warrant will represent the right to purchase one common share at an initial exercise price of $166.66667 per Warrant, subject to certain adjustments (the “Exercise Price”). In addition, Warrants submitted for exercise may be eligible to receive an additional one-third common share due(a) January 21, 2026 and (b) (i) to the incentive share component. The incentive share is an extraextent any principal amount of common shares that Nabors will award when the volume weighted average price of Nabors’ common shares on the day before any Warrant holder exercises its Warrants multiplied by three is at least 6% higher than the sum of the volume weighted average prices of Nabors’ common shares on each of the second, third and fourth days before any Warrant holder exercises its Warrants. Payment for common shares on exercise of Warrants may be in (i) cash or (ii) “Designated Notes,” which the Company initially defines as (a) Nabors Delaware’s (i) 5.10% Notes due 2023, (ii) 0.75% Exchangeable Notes due 2024, (iii) 5.75% Notes due 2025 and (b) the Company’s 7.25% Notes due 2026, subject to compliance with applicable procedures with respect to the delivery of the Warrants and Designated Notes. The
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Exercise PriceNabors Delaware’s existing 5.1% senior notes due 2023, 5.5% senior notes due 2023 and 5.75% senior notes due 2025 remains outstanding on the number of common shares issuable upon exercise are subject to anti-dilution adjustments, including for share dividends, splits, subdivisions, spin-offs, consolidations, reclassifications, combinations, noncash distributions, cash dividends (other than regular quarterly cash dividends not exceeding a permitted threshold amount), certain pro rata repurchases and similar transactions, including certain issuances of common shares (or securities exercisable or convertible into or exchangeable for common shares) at a price (or having a conversion price)date that is less than 95%90 days prior to the applicable maturity date for such indebtedness, then such 90th day or (ii) to the extent 50% or more of the market priceoutstanding (as of the common shares. The Warrants expire on June 11, 2026, butclosing date) aggregate principal amount of the expiration date may be accelerated at any time by the Company upon 20-days’ prior notice. The Company has listed the Warrants0.75% senior exchangeable notes due 2024 remains outstanding and not refinanced or defeased on the over-the-counter market.
Canada Asset Sale
Duringdate that is 90 days prior to the second quarter of 2021, Nabors entered into an agreement to sell the assets of its Canada Drilling segmentmaturity date for $117.5 million CAD (or approximately $94.0 million USD). The sale closed during July 2021.such indebtedness, then such 90th day.
Financial Results
Comparison of the three months ended September 30,March 31, 2022 and 2021 and 2020
Operating revenues for the three months ended September 30, 2021March 31, 2022 totaled $524.2$568.5 million, representing an increase of $85.8$108.0 million, or 20%23%, compared to the three months ended SeptemberMarch 30, 2020.31, 2021. All of our operating segments, with the exception of Canada Drilling due to its sale, experienced an increase in operating revenues over this period. For a more detailed description of operating results see Segment Results of Operations below.
Net loss from continuing operations attributable to Nabors common shareholders totaled $122.5$184.5 million ($15.7922.51 per diluted share) for the three months ended September 30, 2021March 31, 2022 compared to a net loss from continuing operations attributable to Nabors common shareholders of $161.1$140.8 million ($23.4220.16 per diluted share) for the three months ended SeptemberMarch 30, 2020,31, 2021, or a $38.7$43.7 million decreaseincrease in the net loss. The majority of the decreaseincrease in net loss is attributable to $73.2 million in mark-to-market losses from the common stock warrants that were outstanding during the first quarter of 2022. These losses were partially offset by improved market conditions in all our segments from the prior year, together with lower depreciation and lower interest expense.depreciation.
General and administrative expenses for the three months ended September 30, 2021March 31, 2022 totaled $52.9$53.6 million, representing an increasea decrease of $6.7$1.0 million, or 15%2%, compared to the three months ended September 30, 2020. This is primarily reflective of temporary workforce cost reductions taken in the quarter ending September 30, 2020 due to industry market conditions that existed at that time, combined with a moderate increase in workforce since that period as market conditions have improved.March 31, 2021.
Research and engineering expenses for the three months ended September 30, 2021March 31, 2022 totaled $9.5$11.7 million, representing an increase of $1.9$4.1 million, or 26%56%, compared to the three months ended September 30, 2020.March 31, 2021. This is primarily reflective of temporary workforce cost reductions taken in the quarter ending September 30, 2020 due to industry market conditions that existed at that time, combined with a moderatean increase in workforce since that periodresearch and development activities, along with the higher general operating activity levels, as market conditions have improved.
Depreciation and amortization expense for the three months ended September 30, 2021March 31, 2022 was $173.4$164.4 million, representing a decrease of $33.5$12.9 million, or 16%7%, compared to the three months ended SeptemberMarch 30, 2020.31, 2021. The decrease is attributable to the combination of a reduction in depreciation as a result of the many assets that have recently reached the end of their useful lives and limited capital expenditures over recent years. The decrease is also due to the sale of Canada Drilling assets in July 2021.
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Segment Results of Operations
The following tables set forth certain information with respect to our reportable segments and rig activity:
| | | | | | | | | | | | | |
| | | Three Months Ended | | | | | |
| ||||
| | | September 30, | | | | | | | ||||
| | | 2021 | | 2020 | | Increase/(Decrease) |
| |||||
U.S. Drilling | |
| |
|
| |
|
| |
|
|
|
|
Operating revenues | | | $ | 173,441 | | $ | 130,243 | | $ | 43,198 | | 33 | % |
Adjusted operating income (loss) (1) | | | $ | (19,700) | | $ | (39,162) | | $ | 19,462 | | 50 | % |
Average rigs working (2) | | |
| 72.6 | |
| 53.4 | |
| 19.2 | | 36 | % |
| | | | | | | | | | | | | |
Canada Drilling | | | | | | | | | | | | | |
Operating revenues | | | $ | 6,034 | | $ | 10,774 | | $ | (4,740) | | (44) | % |
Adjusted operating income (loss) (1) | | | $ | 1,371 | | $ | (3,507) | | $ | 4,878 | | 139 | % |
Average rigs working (2) | | |
| 4.1 | |
| 7.4 | |
| (3.3) | | (45) | % |
| | | | | | | | | | | | | |
International Drilling | | | | | | | | | | | | | |
Operating revenues | | | $ | 270,008 | | $ | 248,392 | | $ | 21,616 | | 9 | % |
Adjusted operating income (loss) (1) | | | $ | (7,297) | | $ | (16,872) | | $ | 9,575 | | 57 | % |
Average rigs working (2) | | |
| 67.0 | |
| 71.3 | |
| (4.3) | | (6) | % |
| | | | | | | | | | | | | |
Drilling Solutions | | | | | | | | | | | | | |
Operating revenues | | | $ | 45,880 | | $ | 29,324 | | $ | 16,556 | | 56 | % |
Adjusted operating income (loss) (1) | | | $ | 8,607 | | $ | (3,583) | | $ | 12,190 |
| 340 | % |
| | | | | | | | | | | | | |
Rig Technologies | | | | | | | | | | | | | |
Operating revenues | | | $ | 42,053 | | $ | 28,466 | | $ | 13,587 | | 48 | % |
Adjusted operating income (loss) (1) | | | $ | 1,926 | | $ | (1,807) | | $ | 3,733 |
| 207 | % |
| | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | |
| | ||||
| | | March 31, | | | | | | | | ||||
| | | 2022 | | 2021 | | Increase/(Decrease) |
| | |||||
| (In thousands, except percentages and rig activity) | |||||||||||||
U.S. Drilling | | | |
|
| |
|
| |
|
|
|
| |
Operating revenues | | | $ | 217,583 | | $ | 142,299 | | $ | 75,284 | | 53 | % | |
Adjusted operating income (loss) (1) | | | $ | (5,851) | | $ | (23,336) | | $ | 17,485 | | 75 | % | |
Average rigs working (2) | | |
| 90.3 | |
| 60.5 | |
| 29.8 | | 49 | % | |
| | | | | | | | | | | | | | |
Canada Drilling | | | | | | | | | | | | | | |
Operating revenues | | | $ | — | | $ | 20,989 | | $ | (20,989) | | (100) | % | |
Adjusted operating income (loss) (1) | | | $ | (19) | | $ | 3,907 | | $ | (3,926) | | (100) | % | |
Average rigs working (2) | | |
| — | |
| 13.7 | |
| (13.7) | | (100) | % | |
| | | | | | | | | | | | | | |
International Drilling | | | | | | | | | | | | | | |
Operating revenues | | | $ | 279,030 | | $ | 246,838 | | $ | 32,192 | | 13 | % | |
Adjusted operating income (loss) (1) | | | $ | (6,327) | | $ | (18,632) | | $ | 12,305 | | 66 | % | |
Average rigs working (2) | | |
| 72.0 | |
| 64.8 | |
| 7.2 | | 11 | % | |
| | | | | | | | | | | | | | |
Drilling Solutions | | | | | | | | | | | | | | |
Operating revenues | | | $ | 54,182 | | $ | 35,706 | | $ | 18,476 | | 52 | % | |
Adjusted operating income (loss) (1) | | | $ | 14,709 | | $ | 4,710 | | $ | 9,999 |
| 212 | % | |
| | | | | | | | | | | | | | |
Rig Technologies | | | | | | | | | | | | | | |
Operating revenues | | | $ | 36,736 | | $ | 25,748 | | $ | 10,988 | | 43 | % | |
Adjusted operating income (loss) (1) | | | $ | (2,751) | | $ | (2,569) | | $ | (182) |
| (7) | % | |
(1) | Adjusted operating income (loss) is our measure of segment profit and loss. See Note |
(2) | 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. |
U.S. Drilling
Operating revenues for our U.S. Drilling segment increased by $43.2$75.3 million or 33%53% during the three months ended September 30, 2021March 31, 2022 compared to the corresponding period in 2020.2021. This increase was due to a 36%49% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our drilling services have rebounded and increased since the third quarter of 2020.prior year.
Canada Drilling
Operating revenues decreased by $4.7 million during the three months ended September 30, 2021March 31, 2022 compared to the corresponding prior year period primarily due to the sale of the Canada Drilling assets in July 2021.
International Drilling
Operating revenues for our International Drilling segment increased by $21.6$32.2 million or 9%13% compared to the corresponding prior year period primarilyperiod. This increase was due to proceeds received from an early termination11% increase in one ofthe average rigs working, reflecting increased drilling activity as market conditions and demand for our markets duringdrilling services have rebounded and increased since the quarter ended September 30, 2021.prior year.
27
Drilling Solutions
Operating revenues for this segment increased by $16.6$18.5 million or 56%52% during the three months ended September 30, 2021March 31, 2022 compared to the corresponding period in 20202021 as market conditions and demand for our services have rebounded and drilling activity has increased since the third quarter of 2020.prior year.
31
Rig Technologies
Operating revenues for our Rig Technologies segment increased by $13.6$11.0 million or 48%43% during the three months ended September 30, 2021March 31, 2022 compared to the corresponding period as market conditions and demand for our services have rebounded and increasedimproved slightly since the third quarter of 2020.prior year.
Other Financial Information
Interest expense
Interest expense for the three months ended September 30, 2021March 31, 2022 was $42.2$46.9 million, representing a decreasean increase of $10.2$3.9 million, or 19%9%, compared to the three months ended September 30, 2020.March 31, 2021. The decreaseincrease was primarily due to the issuance of $700 million in 7.375% senior priority guaranteed notes due May 2027 in November 2021, partially offset by a reduction to our overall debt restructuringlevels, outstanding notes and exchange transactions in the fourth quarter of 2020 and the first quarter of 2021 resulting in reduced interest expense.
Impairments and other charges
During the three months ended September 30, 2021, we recognized impairments and other charges of approximately $3.1 million which was primarily due to severance and reorganization costs of $2.3 million which were recognized due to ongoing cost cutting and consolidation measures that we have enacted in response to the challenging industry environment due to the COVID-19 pandemic.
During the three months ended September 30, 2020, we recognized impairments and other charges of approximately $5.0 million, which primarily consisted of severance and reorganization costs of $4.8 million due to significant reductions in our workforce and cost cutting measures that we enacted in response to the industry environment due to the COVID-19 pandemic.credit facilities.
Other, net
Other, net for the three months ended September 30, 2021March 31, 2022 was $19.7$80.4 million of loss. Approximately $14.7$73.2 million of this amount related to costs incurred duringmark-to-market losses from the quarter on our energy transition initiatives, including the purchase of certain development stage technologies that were expensed.common stock warrants. In addition, there was an increase in litigation reserves of $2.6 million, $1.5 million of loss on net derivative losses and $0.9were $4.2 million in foreign currency loss.loss and an increase of $3.1 million in litigation reserves.
Other, net for the three months ended September 30, 2020March 31, 2021 was $0.4$7.3 million of income,loss, which included a net gain on debt buybacks of $14.2$8.1 million. This was partially offset by net losses on sales and disposals of assets of approximately $3.3$8.5 million, foreign currency loss of $9.3$2.4 million and an increase in litigation reserves of $0.6$1.5 million.
Income taxes
Our worldwide tax expense for the three months ended September 30, 2021March 31, 2022 was $2.8$13.7 million compared to a $3.7$9.7 million income tax benefit for the three months ended September 30, 2020.March 31, 2021. The increase in tax expense was primarily attributable to the improvement in income before income taxes, excluding the mark-to-market losses related to the common stock warrants, and the geographic mix of our pre-tax earnings (losses).
Comparison of the nine months ended September 30, 2021 and 2020
Operating revenues for the nine months ended September 30, 2021 totaled $1.5 billion, representing a decrease of $216.6 million, or 13%, compared to the nine months ended September 30, 2020. Revenues declined across most of our operating segments due to the impact on our businesses brought on by the COVID-19 outbreak. Our U.S. and International Drilling segments were the two primary drivers, with revenue declines of 18% and 13%, respectively. Each of these segments experienced a decline in activity, as evidenced by the decline in average rigs working, as well as downward pricing pressure, from lower demand. For a more detailed description of operating results see Segment Results of Operations, below.
Net loss from continuing operations attributable to Nabors common shareholders totaled $459.3 million ($62.26 per diluted share) for the nine months ended September 30, 2021 compared to a net loss from continuing operations attributable to Nabors common shareholders of $708.3 million ($102.25 per diluted share) for the nine months ended
32
September 30, 2020, or a $249.1 million decrease in the net loss. The majority of the decrease in net loss is attributable to $339.3 million in various impairments and other charges recognized during the nine months ended September 30, 2020.
General and administrative expenses for the nine months ended September 30, 2021 totaled $159.1 million, representing an increase of $9.3 million, or 6%, compared to the nine months ended September 30, 2020. This is reflective of temporary workforce cost reductions taken in the prior year due to industry market conditions combined with a moderate increase in workforce as market conditions have improved.
Research and engineering expenses for the nine months ended September 30, 2021 totaled $24.9 million, representing a decrease of $1.3 million, or 5%, compared to the nine months ended September 30, 2020. The decrease is a result of cost control efforts across many of our research and engineering projects and initiatives due to current industry market conditions.
Depreciation and amortization expense for the nine months ended September 30, 2021 was $525.4 million, representing a decrease of $119.6 million, or 19%, compared to the nine months ended September 30, 2020. The decrease is attributable to the combination of a reduction in depreciation as a result of the many assets that have recently reached the end of their useful lives and limited capital expenditures over recent years. Impairment charges and retirement provisions recorded throughout 2020 also contributed to the decrease in the current period.
Segment Results of Operations
The following tables set forth certain information with respect to our reportable segments and rig activity:
| | | | | | | | | | | | |
| | Nine Months Ended | | | | | |
| ||||
| | September 30, | | | | | | | ||||
| | 2021 | | 2020 | | Increase/(Decrease) |
| |||||
| | (In thousands, except percentages and rig activity) | ||||||||||
U.S. Drilling | | |
|
| |
|
| |
|
|
|
|
Operating revenues | | $ | 477,346 | | $ | 578,928 | | $ | (101,582) | | (18) | % |
Adjusted operating income (loss) (1) | | $ | (63,905) | | $ | (69,961) | | $ | 6,056 | | 9 | % |
Average rigs working (2) | |
| 67.5 | |
| 71.1 | |
| (3.6) | | (5) | % |
| | | | | | | | | | | | |
Canada Drilling | | | | | | | | | | | | |
Operating revenues | | $ | 39,336 | | $ | 39,929 | | $ | (593) | | (1) | % |
Adjusted operating income (loss) (1) | | $ | 2,670 | | $ | (9,265) | | $ | 11,935 | | 129 | % |
Average rigs working (2) | |
| 8.6 | |
| 8.8 | |
| (0.2) | | (2) | % |
| | | | | | | | | | | | |
International Drilling | | | | | | | | | | | | |
Operating revenues | | $ | 772,128 | | $ | 886,580 | | $ | (114,452) | | (13) | % |
Adjusted operating income (loss) (1) | | $ | (34,368) | | $ | (20,743) | | $ | (13,625) | | (66) | % |
Average rigs working (2) | |
| 66.7 | |
| 80.1 | |
| (13.4) | | (17) | % |
| | | | | | | | | | | | |
Drilling Solutions | | | | | | | | | | | | |
Operating revenues | | $ | 120,697 | | $ | 117,837 | | $ | 2,860 | | 2 | % |
Adjusted operating income (loss) (1) | | $ | 19,841 | | $ | 8,699 | | $ | 11,142 |
| 128 | % |
| | | | | | | | | | | | |
Rig Technologies | | | | | | | | | | | | |
Operating revenues | | $ | 102,353 | | $ | 104,198 | | $ | (1,845) | | (2) | % |
Adjusted operating income (loss) (1) | | $ | (1,335) | | $ | (11,450) | | $ | 10,115 |
| 88 | % |
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U.S. Drilling
Operating revenues for our U.S. Drilling segment decreased by $101.6 million or 18% during the nine months ended September 30, 2021 compared to the corresponding period in 2020 primarily due to a decrease in activity as reflected by a 5% decrease in the average number of rigs working. Pricing for our services has also been negatively affected by the decline in activity.
Canada Drilling
Operating revenues decreased by $0.6 million or 1% during the nine months ended September 30, 2021 compared to the corresponding prior year period primarily due to the sale of the Canada Drilling assets in July 2021.
International Drilling
Operating revenues for our International Drilling segment decreased by $114.5 million or 13% compared to the corresponding prior year period primarily due to reduced activity, as reflected by the 17% decrease in the average number of rigs working.
Drilling Solutions
Operating revenues for this segment increased by $2.9 million or 2% during the nine months ended September 30, 2021 compared to the corresponding period in 2020 primarily due to the increase in market activity and additional product offerings across the U.S. during 2021, relative to the prior year. The decline in activity for this segment in 2020 was more pronounced than the decline in our drilling segments, due to the nature of its operating contracts. As market conditions have improved in 2021, this also has allowed for a more pronounced rebound relative to our drilling segments.
Rig Technologies
Operating revenues for our Rig Technologies segment decreased by $1.8 million or 2% during the nine months ended September 30, 2021 compared to the corresponding period due to the overall decline in activity in the U.S. as mentioned previously. Despite a drop in revenues, this segment implemented significant cost reduction measures to mitigate the impact of the decline in revenue, such that adjusted operating income was up by $10.1 million.
Other Financial Information
Interest expense
Interest expense for the nine months ended September 30, 2021 was $126.9 million, representing a decrease of $31.4 million, or 20%, compared to the nine months ended September 30, 2020. The decrease was primarily due to debt restructuring and exchange transactions in the fourth quarter of 2020 and the first quarter of 2021 resulting in reduced interest expense.
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Impairments and other charges
During the nine months ended September 30, 2021, we recognized impairments and other charges of approximately $65.4 million, representing a decrease of $273.9 million compared to the nine months ended September 30, 2020. This decrease was due to impairments and write offs of long-lived assets of $194.4 million comprised of underutilized rigs and drilling-related equipment across all of our operating segments, impairments of $16.4 million for the remaining goodwill balance attributable to our Rig Technologies operating segment and $11.4 million for the remaining goodwill balance attributable to our Drilling Solutions operating segment recognized during the nine months ended September 30, 2020. Additionally, we recognized an impairment of $83.6 million to write off our remaining intangible assets during the prior year. Partially offsetting the 2020 amounts, we recognized an impairment to our Canada Drilling assets for $58.5 million during the nine months ended September 30, 2021.
Other, net
Other, net for the nine months ended September 30, 2021 was $31.1 million of loss, compared to $48.3 million in net gains during the nine months ended September 30, 2020. The $79.5 million difference between periods was primarily due to the difference in net gains on debt buybacks of $51.7 million, and $14.7 million related to costs incurred during the nine months ended September 30, 2021 on our energy transition initiatives, including the purchase of certain development stage technologies that were expensed.
Income taxes
Our worldwide tax expense for the nine months ended September 30, 2021 was $37.2 million compared to $18.4 million for the nine months ended September 30, 2020. The increase in tax expense was primarily attributable to a recorded liability for an uncertain tax position of $21.1 million in the nine months ended September 30, 2021.
Liquidity and Capital Resources
Financial Condition and Sources of Liquidity
Our primary sources of liquidity are cash and investments, availability under our revolving credit facility and cash generated from operations. As of September 30,March 31, 2022, we had cash and short-term investments of $394.0 million and working capital of $430.6 million. As of December 31, 2021, we had cash and short-term investments of $771.9$991.5 million and working capital of $806.5 million. As of December 31, 2020, we had cash and short-term investments of $481.7 million and working capital of $616.0 million.$1.0 billion.
At SeptemberMarch 30, 2021,31, 2022, we had $925.0 million ofno borrowings outstanding under the 2018 Revolving2022 Credit Facility,Agreement, which has a total borrowing capacity of $981.6$350.0 million. Subsequent to September 30, 2021, we have repaid approximately $335.0 million of the drawn balance with cash on hand.
The 2018 Revolving2022 Credit FacilityAgreement requires us to maintain “minimum liquidity” of no less than $160.0 million at all times, and an asset to debtinterest coverage ratio of(EBITDA/interest expense), which increases on a quarterly basis, and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 4.25:1 as90% of the end of each calendar quarter. Minimum liquidity is defined to mean, generally, a consolidated cash balance consisting of (a) the aggregate amount of unrestricted cashproperty, plant and cash equivalents maintained in a deposit account U.S. or Canadian branch of a commercial bank, plus (b) the lesser of $75 million or an amount equal to 75%equipment of the aggregate amountCompany. Additionally, the Company is subject to certain covenants, which are subject to certain exceptions and include, among others, (i) a covenant restricting our ability to incur liens (subject to the additional liens basket of unrestricted cashup to $150.0 million), (ii) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and cash equivalents held in deposit account ofto repurchase certain indebtedness and (iii) a commercial bank outsidecovenant restricting the ability of the U.S. or Canada, plus (c) available commitments underCompany’s subsidiaries to incur debt
28
(subject to the 2018 Revolving Credit Facility. The assetgrower basket of up to debt coverage ratio applies only during the period which Nabors Delaware fails to maintain an investment grade rating from at least two rating agencies, which was the case as of the date of this report. $100.0 million). As of SeptemberMarch 30, 2021,31, 2022, we were in compliance with both the minimum liquidity and asset to debtinterest coverage ratio and the minimum guarantor value requirements under the 2018 Revolving2022 Credit Facility.Agreement. We also had $53.9$62.6 million of letters of credit outstanding under the 2018 Revolving2022 Credit Facility.Agreement.
As of the date of this report, we were in compliance with all covenants under the 2018 Revolving2022 Credit Facility.Agreement. If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2018 Revolving2022 Credit FacilityAgreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative
35
methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2018 Revolving2022 Credit FacilityAgreement during the twelve month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.
Our ability to access capital markets or to otherwise obtain sufficient financing may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States and our historical ability to access these markets as needed. While there can be no assurances that we will be able to access these markets in the future, we believe that we will be able to access capital markets or otherwise obtain financing in order to satisfy any payment obligation that might arise upon maturity, exchange or purchase of our notes and our debt facilities, loss of availability of our revolving credit facilities and our A/R Facility (see—Accounts Receivable Purchase and Sales Agreement,Agreements, below), and that any cash payment due, in addition to our other cash obligations, would not ultimately have a material adverse impact on our liquidity or financial position. The major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future, increase the cost of future debt, and potentially require us to post letters of credit for certain obligations.obligations
We had 18 letter-of-credit facilities with various banks as of September 30, 2021.March 31, 2022. Availability under these facilities as of September 30, 2021March 31, 2022 was as follows:
| | | | | | | | |
|
| September 30, |
|
| March 31, |
| ||
| | 2021 |
| | 2022 |
| ||
| | (In thousands) |
| | (In thousands) |
| ||
Credit available | | $ | 620,552 | | | $ | 620,552 | |
Less: Letters of credit outstanding, inclusive of financial and performance guarantees | |
| 83,240 | | |
| 77,064 | |
Remaining availability | | $ | 537,312 | | | $ | 543,488 | |
Accounts Receivable Purchase and Sales AgreementAgreements
On September 13, 2019, we entered into an accounts receivables sales agreement (the “A/R Sales Agreement”) and an accounts receivables purchase agreement (the “A/R Purchase Agreement” and, together with the A/R Facility consisting of a Receivables Sales Agreement, and a Receivables Purchase Agreement,the “A/R Facility”), whereby the Originatorsoriginators sold or contributed, and will on an ongoing basis continue to sell or contribute, certain of their domestic trade accounts receivables to a wholly-owned, bankruptcy-remote SPE.special purpose entity (“SPE”). The SPE would in turn, sell, transfer, conveysells, transfers, conveys and assignassigns to third-party Purchasers, all the rights, title and interest in and to its pool of eligible receivables.
On July 13, 2021, we entered into the First Amendment to the ReceivablesA/R Purchase Agreement which extends the term of the A/R Facility by two years, to August 13, 2023. However, the expiration of the agreement could be accelerated to the earlier of (i) December 31, 2022, if by that date the Company’s 2018 Revolving Credit Facility is not amended to extend its termination date to as least October 11, 2024 and immediately after giving effect to such amendment the consolidated cash balance of the company is not at least $220 million or (ii) July 19, 2022, if any of the 5.5% Senior Notes due 2023 of Nabors Delaware remain outstanding as of such date. The amendment also reduced the commitments of the third-party Purchasers from $250 million to $150 million, with the possibility of being increased up to $200 million.
The amount available for purchase under the A/R Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the third-party Purchasers under the A/R Facility is approximately $150.0 million and the amount of receivables purchased by the third-party Purchasers as of September 30, 2021March 31, 2022 was $96.0$136.0 million.
29
The Originators,originators, Nabors Delaware, the SPE, and the Company provide representations, warranties, covenants and indemnities under the A/R Facility and the Indemnification Guarantee. See further details at Note 4—Accounts Receivable Purchase and Sales Agreement.Agreements.
Future Cash Requirements
Our current cash and investments, projected cash flows from operations, proceeds from equity or debt issuances and the facilities under our revolving credit facility2022 Credit Agreement are expected to adequately finance our purchase commitments, capital expenditures,
36
acquisitions, scheduled debt service requirements, and all other expected cash requirements for at least the next 12 months. However, we can make no assurances that our current operational and financial projections will prove to be correct, especially in light of the effects the COVID-19 pandemic has on oil and natural gas prices and, in turn, our business.correct. A sustained period of highly depressed oil and natural gas prices could have a significant effect on our customers’ capital expenditure spending and therefore our operations, cash flows and liquidity.
Purchase commitments outstanding at September 30, 2021March 31, 2022 totaled approximately $261.7$251.8 million, primarily for capital expenditures, other operating expenses and purchases of inventory. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures over the next 12 months represent a number of capital programs that are currently underway or planned.
See our discussion of guarantees issued by Nabors that could have a potential impact on our financial position, results of operations or cash flows in future periods included below under “Off-Balance Sheet Arrangements (Including Guarantees).”
There have been no material changes to the contractual cash obligations table that waswere included in our 20202021 Annual Report.
On August 25, 2015, our Board authorized a share repurchase program (the “program”) under which we may repurchase, from time to time, up to $400.0 million of our common shares by various means, including in the open market or in privately negotiated transactions. Authorization for the program, which was renewed in February 2019, does not have an expiration date and does not obligate us to repurchase any of our common shares. Since establishing the program, we have repurchased 0.3 million of our common shares for an aggregate purchase price of approximately $121.1 million under this program. The repurchased shares, which are held by our subsidiaries, are registered and tradable subject to applicable securities law limitations and have the same voting and other rights as other outstanding shares. As of September 30, 2021,March 31, 2022, the remaining amount authorized under the program that may be used to purchase shares was $278.9 million. As of September 30, 2021,March 31, 2022, our subsidiaries held 1.1 million of our common shares.
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, both in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors and may involve material amounts.
Cash Flows
Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, dividends, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our cash flows for the ninethree months ended September 30,March 31, 2022 and 2021 and 2020 below.
Operating Activities. Net cash provided by operating activities totaled $326.5$41.4 million during the ninethree months ended September 30, 2021,March 31, 2022, compared to net cash provided of $247.9$79.5 million during the corresponding 20202021 period. Operating cash flows are our primary source of capital and liquidity. Cash from operating results (before working capital changes) was $174.1$68.6 million for the ninethree months ended SeptemberMarch 30, 2021, a decrease31, 2022, an increase of $111.2$16.5 million when compared to $285.3$52.1 million in the corresponding 20202021 period. This was due to the declineincrease in activity and operating results across most of our business for the ninethree month period ended September 30, 2021March 31, 2022 compared to the ninethree month period ended September 30, 2020.March 31, 2021. Changes in working
30
capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are also significant factors affecting operating cash flows and can be highly volatile in periods of increasing or decreasing activity levels. Changes in working capital items provided $152.4used $27.3 million in cash flows during the ninethree months ended September 30, 2021,March 31, 2022, a $189.8$54.7 million improvementunfavorable change as compared to the negative $37.4$27.4 million in cash flows provided from working capital in the corresponding 20202021 period. The positive impact fromThis is reflective of the increased working capital more than offset the negative impact from operating results.requirements that are a result of activity level increases.
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Investing Activities. Net cash used for investing activities totaled $65.1$82.1 million during the ninethree months ended SeptemberMarch 30, 202131, 2022 compared to net cash used of $129.3$19.1 million during the corresponding 20202021 period. Our primary use of cash for investing activities is capital expenditures for rig-related enhancements, new construction and equipment, as well as sustaining capital expenditures. During the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, we used cash for capital expenditures totaling $179.9$84.3 million and $153.1$40.9 million, respectively.
We received $121.7$3.7 million in proceeds from sales of assets primarily related to the sale of our Canada Drilling assets, and insurance claims during the ninethree months ended SeptemberMarch 30, 202131, 2022 compared to $21.8$10.8 million for the corresponding 20202021 period. We also received $11.4$10.9 million in sales and maturities of investments for the ninethree months ended September 30, 2021 compared to $2.0 million for the corresponding 2020 period.March 31, 2021.
Financing Activities. Net cash provided byused for financing activities totaled $37.8$555.3 million during the ninethree months ended September 30,March 31, 2022. During the three months ended March 31, 2022, we repaid $460.0 million in net amounts under our revolving credit facility and $86.1 million of long-term debt.
Net cash used for financing activities totaled $113.9 million during the three months ended March 31, 2021. During the ninethree months ended September 30,March 31, 2021, we used $49.1 million for a redeemable non-controlling interest distribution, and we paid dividends totaling $7.3$40.0 million to our preferred shareholders. We receivedin net proceeds of $98.6 million fromamounts repaid under our revolving credit facility and notes during the quarter, including a draw on the revolving credit facility to pay off $82.5 million in maturing notes in September 2021. Subsequent to September 30, 2021, we have repaid an additional $335.0 million of the amounts provided from the revolver.
Net cash used for financing activities totaled $48.5 million during the nine months ended September 30, 2020. During the nine months ended September 30, 2020, we received net proceeds of $1.0 billion from the issuance of new long-term debt as well as $397.3 million in net amounts borrowed under our revolving credit facility. This was partially offset by a $1.4 billion$16.8 million repayment on our senior notes. Additionally, we paid dividends totaling $18.9$3.6 million to our common and preferred shareholders.
Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries
Nabors Delaware is an indirect, wholly owned subsidiary of Nabors. Nabors fully and unconditionally guarantees the due and punctual payment of the principal of, premium, if any, and interest on Nabors Delaware’s registered notes, which are its (i) 5.10% Senior Notes due 2023 (the “2023 Notes”), (ii) 5.50% Senior Notes due 2023 (the “5.50% 2023 Notes”) and (iii) 5.75% Senior Notes due 2025 (the “2025 Notes” and, together with the 2023 Notes and the 5.50% 2023 Notes and the 2025 Notes, the “Registered Notes”), and any other obligations of Nabors Delaware under the Registered Notes when and as they become due and payable, whether at maturity, upon redemption, by acceleration or otherwise, if Nabors Delaware is unable to satisfy these obligations. Nabors'Nabors’ guarantee of Nabors Delaware'sDelaware’s obligations under the Registered Notes are its unsecured and unsubordinated obligation and have the same ranking with respect to Nabors'Nabors’ indebtedness as the Registered Notes have with respect to Nabors Delaware'sDelaware’s indebtedness. In the event that Nabors is required to withhold or deduct on account of any Bermudian taxes due from any payment made under or with respect to its guarantees, subject to certain exceptions, Nabors will pay additional amounts so that the net amount received by each holder of Registered Notes will equal the amount that such holder would have received if the Bermudian taxes had not been required to be withheld or deducted.
The following summarized financial information is included so that separate financial statements of Nabors Delaware are not required to be filed with the SEC. The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.
In lieu of providing separate financial statements for issuers and guarantors (the “Obligated Group”), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for the Obligated Group based on Rule 13-01 of the SEC’s Regulation S-X that we early adopted effective April 1, 2020.
All significant intercompany items among the Obligated Group have been eliminated in the supplemental summarized combined financial information. The Obligated Group’s investment balances in Subsidiary Non-Guarantors have been excluded from the supplemental combined financial information. Significant intercompany balances and activity for the Obligated Group with other related parties, including Subsidiary Non-Guarantors (referred to as “affiliates”), are presented separately in the accompanying supplemental summarized financial information.
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Summarized combined Balance Sheet and Income Statement information for the Obligated Group follows (in thousands):
| | | | | | | | | | | | |
| | September 30, | | December 31, | | March 31, | | December 31, | ||||
Summarized Combined Balance Sheet Information |
| 2021 | | 2020 |
| 2022 | | 2021 | ||||
| | | | | | | | | | | | |
Assets | | | | | | | | | | | | |
Current Assets | | $ | 301,227 | | $ | 27,432 | | $ | 1,257 | | $ | 462,872 |
Non-Current Assets | |
| 427,197 | |
| 415,768 | |
| 439,714 | |
| 431,651 |
Noncurrent assets - affiliates | |
| 6,841,765 | |
| 7,226,211 | |
| 5,937,401 | |
| 6,149,188 |
Total Assets | |
| 7,570,189 | |
| 7,669,411 | |
| 6,378,372 | |
| 7,043,711 |
| |
| | | | | |
| | | | |
Liabilities and Stockholders' Equity | |
| | | | | |
| | | | |
Current liabilities | |
| 44,521 | |
| 71,605 | |
| 58,378 | |
| 75,112 |
Noncurrent liabilities | |
| 3,180,836 | |
| 3,086,794 | |
| 2,758,053 | |
| 3,367,502 |
Noncurrent liabilities - affiliates | |
| 741,989 | |
| 494,589 | |
| — | |
| 4,471 |
Total Liabilities | | | 3,967,346 | | | 3,652,988 | | | 2,816,431 | | | 3,447,085 |
Stockholders' Equity | | | 3,602,843 | | | 4,016,423 | | | 3,561,941 | | | 3,596,626 |
Total Liabilities and Stockholders' Equity | | | 7,570,189 | | | 7,669,411 | | | 6,378,372 | | | 7,043,711 |
| | | | | | | ||||||
| | Nine Months Ended | | Year Ended | | | | | | |||
| | September 30, | | December 31, | | | Three Months Ended March 31, | | Year Ended December 31, | |||
Summarized Combined Income Statement Information |
| 2021 | | 2020 |
| 2022 | | 2021 | ||||
Total revenues, earnings (loss) from consolidated affiliates and other income | | $ | (317,241) | | $ | (554,953) | | $ | (55,129) | | $ | (277,147) |
Income from continuing operations, net of tax | |
| (437,896) | | | (581,521) | |
| (173,604) | | | (441,310) |
Dividends on preferred stock | |
| (3,653) | | | (14,611) | |
| — | | | (3,653) |
Net income (loss) attributable to Nabors common shareholders | |
| (441,549) | | | (596,132) | |
| (173,604) | | | (444,963) |
Other Matters
Recent Accounting Pronouncements
See Note 2—Summary of Significant Accounting Policies.
Off-Balance Sheet Arrangements (Including Guarantees)
We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity and capital resources. The most significant of these off-balance sheet arrangements include the A/R Facility (see —Accounts Receivable Purchase and Sales Agreement,Agreements, above) and certain agreements and obligations under which we provide financial or performance assurance to third parties. Certain of these financial or performance assurances serve as guarantees, including standby letters of credit issued on behalf of insurance carriers in conjunction with our workers’ compensation insurance program and other financial surety instruments such as bonds. In addition, we have provided indemnifications, which serve as guarantees, to some third parties. These guarantees include indemnification provided by us to our share transfer agent and our insurance carriers. We are not able to estimate the potential future maximum payments that might be due under our indemnification guarantees. Management believes the likelihood that we would be required to perform or otherwise incur any material losses associated with any of these guarantees is remote.
The following table summarizes the total maximum amount of financial guarantees issued by Nabors:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maximum Amount |
| | Maximum Amount |
| ||||||||||||||||||||
|
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
|
| 2022 |
| 2023 |
| 2024 |
| Thereafter |
| Total |
| ||||
| | (In thousands) |
| | (In thousands) |
| ||||||||||||||||||||
Financial standby letters of credit and other financial surety instruments | | $ | 45,889 |
| 140,828 |
| 112 |
| 50 | | $ | 186,879 | | | $ | 35,156 |
| 13,065 |
| 8,488 |
| 35,967 | | $ | 92,676 | |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We may be exposed to market risks arising from the use of financial instruments in the ordinary course of business as discussed in our 20202021 Annual Report. ThereOther than changes in the fair value of our warrants due to changes in trading values as discussed in “Note 6 Shareholders’ Equity” to our Condensed Consolidated Financial Statements , there were no material changes in our exposure to market risk during the ninethree months ended September 30, 2021March 31, 2022 from those disclosed in our 20202021 Annual Report.
ITEM 4. CONTROLS AND PROCEDURES
We maintain a set of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. We have investments in certain unconsolidated entities that we do not control or manage. Because we do not control or manage these entities, our disclosure controls and procedures with respect to these entities are necessarily more limited than those we maintain with respect to our consolidated subsidiaries.
The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 8 — Commitments and Contingencies — Litigation for information regarding our legal proceedings.
ITEM 1A. RISK FACTORS
Except as set forth below, there have been no material changes from the risk factors previously disclosed in Part 1, Item 1A, of our 20202021 Annual Report on Form 10-K, which in addition to the information set forth elsewhere in this report and the 20202021 Annual Report, should be carefully considered when evaluating us. These risks are not the only risks we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business.
Our business may be affected by changes in applicable sanctions or export controls laws and regulations, including those targeting Russia.
We will be subjectOur international operations expose us to compliance obligations and risks under applicable economic sanctions, export controls and trade embargoes, such as those imposed, administered and enforced by the United States and the United Kingdom and other relevant sanctions authorities (collectively, “Sanctions”). In response to ongoing military hostilities between Russia and Ukraine, the United States, the United Kingdom, the European Union, and other jurisdictions imposed new and additional economic sanctions, export controls and other trade restrictions (“collectively, “Sanctions Measures”) targeting Russia, Belarus and certain regions of Ukraine, including Sanctions Measures that impose: (i) restrictions on engaging in specified activities or transactions, or any and all activities and transactions, with, involving or for the benefit of certain designated Russian and Belarusian entities or individuals (collectively, “Sanctions Targets”); (ii) a number of uncertainties while we pursue the initial public offering of Nabors Energy Transition Corp. (“NETC”), and during the timeframe when NETC pursues a business combination, which could adversely affect our business, financial condition, results of operations, cash flows and share price.
While we have announced our intention to pursue an initial public offering of NETC, a newly formed special purpose acquisition company (“SPAC”) co-sponsored by us, there has recently been heightened regulatory focusspecific prohibition on SPACs resulting in substantial uncertaintynew investment in the SPAC markets. PursuingRussian energy sector, broadly defined to include the initial public offeringprocurement, exploration, extraction, drilling, mining, harvesting, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication or transport of petroleum, natural gas, liquified natural gas, natural gas liquids, or petroleum products or other products capable of producing energy; and (iii) a SPACbroad prohibition on new investment in this uncertain environment may result in additional costs, delays in the SPAC initial public offering process and attention from our management and employees. There is no assurance that we will be able to consummate NETC’s initial public offering on favorable terms or at all.
If we are unable to consummate NETC’s initial public offering on favorable terms or at all, or if we complete the initial public offering and NETC is unable to consummate a suitable business transaction during the prescribed two-year time period set forth in the terms of the initial public offering, we may experience negative reactions from the financial markets and from our shareholders. In addition, in the event that NETC is able to find a suitable business combination, or if the business combination is unsuccessful, there is no assurance that we will realize the anticipated value from such transaction.
Russia.
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Pursuant to applicable Sanctions, we may be obliged to limit our business activities, may incur costs in order to implement and maintain compliance programs, and may be subject to investigations, enforcement actions or penalties relating to actual or alleged instances of noncompliance with the Sanctions Measures. It may also be necessary for us to take certain actions, including suspending or winding down our operations in Russia, in order to maintain compliance with, or satisfy obligations under, applicable Sanctions.
We are committed to compliance with all applicable Sanctions and have implemented and maintain dedicated policies and procedures that we believe to be customary and appropriate to promote and maintain our compliance with applicable Sanctions. However, we can provide no assurances that these policies and procedures will always be effective in identifying Sanctions Targets and their property interests or in preventing violations of applicable Sanctions by us or employees, agents or other persons acting on our behalf.
The new regulation concerning mandatory COVID-19 vaccinationfull scale of employeesthe impact of the Sanctions Measures and Russia’s responses to the Sanctions Measures (such as counter-sanctions and the potential nationalization of assets in Russia) is currently unclear but such developments could adversely affect our operations and the oil and gas sector generally, which could have a material adverse impacteffect on our business, results of operations, financial condition and cash flow. In addition, U.S. and other governments have increased their oversight and enforcement activities with respect to Sanctions laws and regulations and it is expected that the relevant agencies will continue to increase these investigative and enforcement activities. A violation of Sanctions could result in severe criminal or civil penalties and reputational harm, which could separately adversely affect our business and results of operations.
On November 4, 2021, the Department of Labor’s Occupational Safety and Health Administration (“OSHA”) announced a new emergency temporary standard (“ETS”) requiring all employers with at least 100 employees to develop, implement and enforce a mandatory COVID-19 vaccination policy, unless they adopt a policy requiring employees to choose to either be vaccinated or undergo regular COVID-19 testing and wear a face covering at work. The ETS was officially published and made effective on November 5, 2021 and companies must comply with most requirements within 30 days of publication and with testing requirements within 60 days of publication.
It is currently not possible to predict with certainty the exact impact that this ETS will have on us. As a company with more than 100 employees, we will be required to mandate COVID-19 vaccination of our workforce or our unvaccinated employees will be required to undergo weekly testing.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We withheld the following shares of our common stock to satisfy tax withholding obligations in connection with grants of stock awards during the three months ended September 30, 2021March 31, 2022 from the distributions described below. These shares may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item, but were not purchased as part of a publicly announced program to purchase common shares:
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| Approximated |
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| Approximated |
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| | | | | | | Total Number | | Dollar Value of |
| | | | | | | Total Number | | Dollar Value of |
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| | | | | | | of Shares | | Shares that May |
| | | | | | | of Shares | | Shares that May |
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| | Total | | Average | | Purchased as | | Yet Be |
| | Total | | Average | | Purchased as | | Yet Be |
| ||
| | Number of | | Price | | Part of Publicly | | Purchased |
| | Number of | | Price | | Part of Publicly | | Purchased |
| ||
Period | | Shares | | Paid per | | Announced | | Under the |
| | Shares | | Paid per | | Announced | | Under the |
| ||
(In thousands, except per share amounts) |
| Repurchased |
| Share (1) |
| Program |
| Program (2) |
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| Repurchased |
| Share (1) |
| Program |
| Program (2) |
| ||
July 1 - July 31 | | — | | $ | 90.47 | | — | | 278,914 | | ||||||||||
August 1 - August 31 | | — | | $ | 87.51 | | — | | 278,914 | | ||||||||||
September 1 - September 30 | | 1 | | $ | 84.91 | | — | | 278,914 | | ||||||||||
January 1 - January 31 | | 24 | | $ | 83.00 | | — | | 278,914 | | ||||||||||
February 1 - February 28 | | 8 | | $ | 124.33 | | — | | 278,914 | | ||||||||||
March 1 - March 31 | | 3 | | $ | 140.28 | | — | | 278,914 | |
(1) | Shares were withheld from employees and directors to satisfy certain tax withholding obligations due in connection with grants of shares under our 2013 Stock Plan and 2016 Stock Plan. Each of the 2016 Stock Plan, the 2013 Stock Plan, the 2003 Employee Stock Plan and the 1999 Stock Option Plan for Non-Employee Directors provide for the withholding of shares to satisfy tax obligations, but do not specify a maximum number of shares that can be withheld for this purpose. These shares were not purchased as part of a publicly announced program to purchase common shares. |
(2) | In August 2015, our Board authorized a share repurchase program under which we may repurchase up to $400.0 million of our common shares in the open market or in privately negotiated transactions. The program was renewed by the Board in February 2019. Through |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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| | |
Exhibit No. |
| Description |
31.1 | | |
31.2 | | Rule 13a-14(a)/15d-14(a) Certification of William Restrepo, Chief Financial Officer* |
32.1 | | |
101.INS | | Inline XBRL Instance Document* |
101.SCH | | Inline XBRL Schema Document* |
101.CAL | | Inline XBRL Calculation Linkbase Document* |
101.LAB | | Inline XBRL Label Linkbase Document* |
101.PRE | | Inline XBRL Presentation Linkbase Document* |
101.DEF | | Inline XBRL Definition Linkbase Document* |
104 | | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) |
*Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| NABORS INDUSTRIES LTD. | |
| | |
| By: | /s/ ANTHONY G. PETRELLO |
| | Anthony G. Petrello |
| | Chairman, President and |
| | Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
| By: | /s/ WILLIAM RESTREPO |
| | William Restrepo |
| | Chief Financial Officer (Principal Financial Officer and Accounting Officer) |
| | |
| Date: |
|
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