NBR - Earnings call transcript Q4 2017

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Operator

Good morning, and welcome to the Nabors Industries Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Denny Smith, Vice President of Corporate Development. ahead. go Please

Dennis A. Smith

these Chief access and In with and slides They can Investor on the and the the and our XXXX everyone, in Such download Commission. to expect follow filings nabors.com they in today you markets. if and Securities are Exchange include the management of forward-looking for Nabors' the into Officer, find today, certain and them Chairman, they joining of customary Restrepo, Tony, and ways. have our call our well time to from markets and time webcast, Since available Good commentary of Chief of where Relations slides some and our as results, section replay our forward year our of thank myself, Chris to along our events Officer the under Drilling under Siggi desire. team. by earnings of organization; Nabors these as quarter by Papouras, Canrig; Operating Financial President expectations, Securities within two the our are our Petrello, full remarks, with constitute With statements their posted posted as will for Instructions within to we to President statements webcast. to for Nabors Executive you will senior and we as teleconference. disclosed fourth One, the Alternatively, website, perform may supporting Nabors listing. John the which participating Officer; other download will format are submenu information. teleconference William support Acts President under Meissner, as perspectives morning, the if uncertainties with providing calendar, XXXX. subject are Tony you you the Chief you much the and in can from there accessible listed our addition of risks Exchange us Today how in forward-looking along materials members conference our are you're insights William of meaning follow presentation a Sanchez, Global we Drilling with Solutions;

qualified result such a forward-looking and mean differ such statements. actual during factors, adjusted to of from adjusted EBITDA. whether indicated All as certain earnings these call, if discuss on William the as is As or that and either the defined presentations, in or income, our our operating reference we by our during materially adjusted or EBITDA by financial results word website releases. EBITDA Tony measures their made may otherwise, Also, by adjusted non-GAAP EBITDA those term implied may

of investor relations GAAP to reconciliation comparable a posted We of the non-GAAP have our measures. financial the section these measures to website recently most

the Now turn to call over begin. I'll to Tony

Anthony G. Petrello

with of of Welcome Good review a We view going morning, and review follow William forward. operations we the everyone. we will to and then for appreciate our questions. as our I your market your quarter wrap the fourth the participation will results. will of financial take up call. XXXX our

what market I for would a to the a and trends, into to moment year quarter's like getting Nabors. take Before financials was review XXXX transformational

the highlight Specifically, main to four like would I accomplishments.

materially International joint our value venture with initiated enhances believe of franchise. Aramco. we First, operations our this the Saudi I with SANAD,

NDS support already Tesco Second, globally. strategy. synergies we acquired yielding to This is our

our markedly shifted U.S. faster continue Next, be utilized. the has margin pace and expansion fully to units SmartRig of

We expect this to trend continue the year. through

represents $XX.X ago. a for the that NDS or XXX% Nabors of quarter. fourth year adjusted met figure million we EBITDA from our $XX-million over annualized Finally, This Drilling growth target Solutions

announced an world's significantly have XX opportunity the largest joint with by ultimately XX commence deliveries These manufactured well should currently more by in what on start This contingent higher Eight and efficiency rigs SANAD. productivity rigs and X in these sale over build taking Aramco. to working of Arabia. driller Saudi operating the agreement. subject are total the jack-ups to be three operations this We purchase represents between a to remaining December time. these Saudi previously are two producer new partner achieve started land rigs partnership Let's Saudi are venture, our owned rigs begin oil with XX, of and secured Of later quarter. will and Arabia. SANAD

long-term in from contracts XXXX. will and These We rigs begin expect economics. deliveries prescribed benefit initial to

SANAD pleased success. that venture commercial On acquisition senior added experienced to December the committed is three closed We board Aramco ensuring are successfully Tesco. we is XX, a the has and the executives to of that

Our to vision to services. the is drilling as for serve delivery platform leverage rig the rig

run in as our the now potential. that upside at integration we the and and additional of women well and number There pleased pleased provider across lines. We in topic has reputation understanding well $XX on a Tesco may We tier XXXX level a $XX-million counterparts service I followed alone. is million product an are that XXXX. $XX around doing capture from this gain anticipate to Tesco rate call, million run worldwide a their and target. revisit our Nabors. I between synergy million report cost as last we $XX we will to manufacturer. synergy am at cooperation thereafter The of the multiple better well equipment making outlined are top and rig underway, revenue by fine are successfully rate this On for tubular target men long of be of we as good a had excellent progress

primary driver increased day. from This growth in of the several be margin business about which the more revenue reasons, average EBITDA to XXXX. and from detail. will and margins U.S. revenue side. the the overwhelmingly the adjusted to the $X,XXX anticipate is from will I primarily daily We due in XX in U.S., cover our to for segment Lower Turning acceleration per growth came $X,XXX nearly This

for This previously Given the its line at product is Services The of Canrig XXXX we composed achieved contribution penetration. the rate an just Rig many our Drilling beginning XXXX revised of steerable $XX had million and segment size robotics and was Rig have to of EBITDA meeting from of of segment reach adjusted to an growing company, run quarter, segment. run $XX is our quarter million in annual new recently systems. EBITDA initiated fourth the acquired named of products At rotary our rate goal that and breakout reporting target. the was and We gain for annualized separate time, Solutions. new fourth our adjusted significant our reporting what NDS. from the to to yet NDS million Technologies NDS our $XX.X We

XXXX. With at is see it of the to new end like this challenge the to ourselves time again year, would business we terms in where of

We certain are of targeting on margin to scale expansion contribution We Economies opportunities adjusted rate both geographically to see have million our product. NDS the by $XXX EBITDA fourth and double to an quarter us annualized products. year XXXX. grow its in a enabled of

largely our was contract of in $XXX WTI through strong and quarter the $XX revenues we steady turn day Nabors' Canrig in the adjusted activity and rates range driven decline and U.S. internationally EBITDA that our of In count the both and margins. so prices me operators' expect quarter, by business, impacted this $XX been margins growth price the generated XXXX worldwide cycle. average to Lower NDS as Canrig million clients. XXXX. than by offset in both are higher dip XX third million, during in third in and rebound for Canada the was we activities $XXX a operating quarter. quarter, $XXX in this order occurred increased performance range, Nabors seeing compares above rig Now flat to budget on in solidly remainder respectively, of activity higher At $XXX in see expected. a primarily dampened million July and International. this results. more the in for $XX, increase quarter rig Also, let U.S. interest million. to reflected from performance the in With Brent solidly This fourth quarter's to and the oil had The deferrals the

our me bit a into let down further drill segments. of business each Now,

this accelerated a was Turning drove to accelerated This U.S., XXXX as the to increase flat average fourth count increase growth Drilling with of was rig of adjusted to a is with day segment increased trend budgets. margin the rate the the relatively results of in $X,XXX XXX approximately working quarter. entirety count the the has rigs, entirely financial Higher for believe the EBITDA. even down rig improved, are contract U.S. XXX. in million We initiation revenue. due quarter running the U.S. rig $XX in margins Currently, we sustainable. signings margin X of fourth This

renewed increased have over market organizational We with for and lag. expansive moderately XXXX with on clients are with market repricing in oil budgets demand our to operator led this short-term rates Rising the contracts prices same the rigs months. reduced have focus to last rigs few

low just The At these XX renewing to we time, power XX Take average under term more we of remains is much We $XX,XXX of idea for that fleet, margins. Lower the term pad-to-pad you contracts well-to-well higher. same higher coiled support rolling contracts accurately, you to of have SmartRig mid-$XX,XXXs quarter. our conviction and this To the how an bolstering in are continue off roll our day contracts. some or, pricing give see rate the to $XX,XXX. rigs units

future expect than work We margin our this rig about roughly the major rigs through the are operational tackling. the progression FCR Lower the still M-XXXX rigs of of with the we quarter this is in year. with working contribution versus legacy the add expect up quarter, XXX I no to its see XX the daily cost margin of fourth day the the we new side over now in we in do its initiatives costs, We Permian client. on start pulling a add have over rigs. With Project, final beginning costs There our average in are the the April in average weight Lower another drilling XXX $XXX This equation margin quarter quarter. we three to have for XX decreasing XXX in above Additionally, currently X, Lower exiting Big see M-XXX XX. and for U.S. multiple to four quarters. Foot total later the The to and pace. When should AC includes right to currently ringing XX similar

program, in the share growing the with us has enhancement nearly rig enabled SmartRig demand and value now to units our meet Our creation complete, for customers.

we demand, completed expect enhancement remaining over eight our have to We the will three put Northern program U.S. be these strengthening next work upgrades the quarters. eight in in located With and

Let moving customer the as me to term the XX. for turn to and overall are demand outlook. increasing discuss pricing are and driving higher portion our in allocation are utilization leading-edge is Strong rates traction day willing fleet. we contracts, rigs. full of clients Many our a term highest-spec Lower Current the

However, increasing a are base. very from percentage this we low

rigs many to plan Lower surveyed rig addition supported add of These We by about available As pace them. months about steady six beyond working again In total. our that from operators smaller our see XX% at year represent a the in structure to Twice count. clients. we a these XX of to clients we low large term months. XX information, current lengthen expect is of XX the The Lower clients budget lags drop of XX count Lower of rigs, today's broad-based month. are public earlier this super at today, fleet as customers exit rigs projections. pricing XX spec coming of rate this on term as mid-$XX,XXX would additions as environment the to the rig from and per we third only these larger Based private plan today, total the The above our for day of now. to overall contracted on

and a factors. prices course, oil this other long change may or a is year based Of time on

date In with delayed International. to Aramco turn initiation segment, was originally the we variance. later working average this our anticipated, the source for than declined for increase. slightly versus had Let's along our venture of rig start-ups our International net several joint expectations count an A

currently quarter with versus the rigs. for internationally the rigs exited are fourth we working average Today, However, we XX the XX XX at quarter.

activity quarter we As increases resume with offset noted to Mexico in expected mid returned these uptick pause, along UAE we did. in call, to previous normalized level have have a should the for right. rig low start platforms we in on $XX,XXXs, the and quarter a fourth International to margins quarter. the After expect International. this the in drop more Offshore the to still dates Ecuador which in but in return a they to India the We significant single by Russia, rigs Algeria, work and first moved

Finally, December a the (XX:XX) on X three incremental will SANAD QX. of rigs work full contributed quarter for have

As CapEx, mind. several we significant it new-build pertains criteria larger requiring bidding in to tenders with are

most our and importantly, expect return First on reasonable investors a capital.

bring rigs as we Next, solutions. be fulfilling these while the possible I offset have our of add a contributions deliver and we new package and Any full requirements, for CapEx extent top is both with payback. client To repeatedly, deleveraging are upfront to our stated should and clients as should as value target William much can enthusiastic priority.

not win-work-at-all-costs builds. incremental comes when However, approach a mentality to bidding with for it will we bids new

Canada. Let's We U.S., the the working higher gas average not With third. a from in the practically XX momentum. Canada level there fourth relatively of gathered quarter, turn unchanged versus mix rigs has had to same the

We Canadian E&P The XXXX. in we more with We has months. have currently there market to legacy for companies our both working the there and relationships. as whom strong rig rigs have see margins activity versus winter XXXX XX NDS increasing increases regional transitioned

program tends upgrade that increased seasonal Our high-spec has targeted the working rig through to our capacity remain breakup.

NDS. to turn Let's

for continued Lower quarter-on-quarter. met and Nabors a run $XXX-million day have working I of target climb. QX will segment and for Solutions. across margins reported XXXX. now we've target As our adjusted called run daily our XXXX own NDS Drilling $XX-million set EBITDA in mentioned margins rate Drilling to by Solutions rate earlier, increased fleet, QX Averaged We be $XXX revenues XX per nearly its

anticipate $X,XXX stage the of course XX% rigs In were had be NDS growth the big to our rates to we a of three almost with Incremental We Overall at casing from increased services these XXXX, penetration services by later Lower with XX% to or continued in Lower ample least threefold margins driven the and, will Tesco. our steady this, running offering XX, directional a we XX our drilling grow this of NDS course, for quarter services. steerable rotary early to expect additional room Over day quarter. year. running commercial nearly tool plus five internationally. XX penetration forward more step Lower MPD running

emerging in date focused in of to and efforts for XX, most Saudi has directional Arabia the MPD Lower NDS believe While its we will market XXXX. be drilling an

drilling have We two Tesco and tubular commenced has a strong there. directional business jobs services

slightly the Arabia, us for produce NDS These Rig expansion growth $XXX-million back identified of in We for targets developments Canrig, the positive our quarter target to XXXX. again $XXX-million internationally. Saudi EBITDA. have bounced confidence to we additional segment, XXXX. component continued give now principal Beyond Technologies reiterate this adjusted new

technologies EBITDA a whole division, quarter. fourth a and million $X.X rotary robotic adjusted the negative However, for expenses the segment tool the this had when for development the accounting for steerable as

my of on importantly, to has half review a Nabors concludes will and of provide We effort additional the benefit robotics XXXX, quarter's second we an equipment addition perspective, the associated on the offshore. steerable will to the from become service we the A benefit drilling outlook. factors, R&D this results along William incrementally believe the commercial from long-term both Canrig. in sales throughout and systems with business positive EBITDA aftermarket thoughts potential synergies to market expect the now Due expect comments. transition rig of and these efforts segment The provider adjusted turn slowly-strengthening to and Canrig but year. rotary automation should year. Tesco's leading also equipment more to financial This the

William J. Restrepo

$X.XX. loss to were from Good of recent corporate included and quarter morning. costs tax adjustments the The The increased U.S. the by day. rates impacted $XXX at represented diluted by net to from customers on million third XX. time Aramco in to Tesco balances Average a $X.XX offset attributable results count increase compared X% loss $XXX in diluted per experienced to day adversely for X% for reserves. of per $X.XX also the changes in the quarter, post-tax legislation, acquisition from as an Drilling higher fourth quarter. fell $XX.X idle the earnings continuing start-up moving impact quarter one or some million Lower of million The our $XXX which the quarter million compared operations of million by quarter other the share per per to in revenue operations new U.S. and results revenue $XXX as to Nabors from to share fourth quarter $XXX share related diluted rigs tax by reflecting were Revenue the venture. rig the or joint rig we from prior the tax was improvement. The to the a million, Saudi

the Tesco well quarter fourth count growth increased the product increases As in was weakening a Similar by activity. increased Canada, in quarter. attributable quarter. impact. equipment despite revenue Adjusted by the is Drilling rig $XXX million revenue revenue day. the was of primarily a lower had recovery number a rig $XXX an charges positive quarter have pause $XX driven Today's for resumed in slightly the Solutions, $XXX by revenue as which EBITDA third average Tony was temporary count and in million for Much rose oil to activity In $X,XXX-increase revenue quarter, to $X million Rig Canada's in XX% this following by mobs rig average (XX:XX) a impacted software revenue Solutions' to Drilling compared third this International in quarter. during A per noted, to to by X% after of Technologies million revenue prices XX revenue. third XX% quarter other reflected in of to deferrals of by $XX-million day of rigs. to fourth $XX well million. Lower Tesco margins. our performance adjusted XX tubular as the our grew U.S. improvement XX% primarily higher by fourth services customers. in largest to revenue and million to drivers. and increased $XX by EBITDA increase the higher XX placement installations is average mainly XX wellbore Lower contributed rates, quarter million. were high also above the as Increased the quarter driven

trend this operating day-rate with to future continue, expect lower We in along costs quarters.

offshore from be results, will second $X,XXX, for from and seasonal work M-XXX recently-mobilized by signed Additional platform the steadily the work. Lower early Drilling which term re-pricing The XXXX market the driven our increased bolts by exceeding $X,XXX nearly a day to the once quarter. expectations the XX quarter enhanced significantly in rigs XXXX margins for in rig the was or rates. increasing improvement timeframe spot contracts starts

We the endure is remaining the see Texas continues upgrades and trend expect trend to inquiries pricing spring fleet, and with Rockies market to firm. we and the as re-price This upcoming in the this visible picking though rollovers day favorable continue contract our the newbuilds Bakken to most thaw. rate join in up

bear anticipate the cost XXXX. around As going fruit reduction with XX remainder reporting of efforts pace margins a first per of improvement similar forward quarter, start $X,XXX our day Lower for the we to in

interest XXX average rigs and of between expect quarter. first existing to commitments, level customer the XXX we working current the Given and in

of in working lower count. exceptional quarter's Lower have XX of with of today. the a The a quarter. negatively. the $X margin, EBITDA rig million also million XXX Bad $X rigs third our cost as $X.X we to count debt Compared results in million As of met approximately approximately on $XX,XXX declined lower by International albeit a margins expectations, reminder reserves million rig impacted sequentially. fourth adjusted total the us $XXX

first expect SANAD an With rigs roughly rigs the the quarter. rigs various we of the for inclusion start-up of and the incremental report world, the five around to

we noncore additional today. extensions, multiyear also sale XX lower next rates. term somewhat of anticipate jack-up signed margin but rigs would higher business, which few still provide quarter, the potential months, at as working taking of place We the have but that have impact. will effective in We an The attractive, first

count. International jack-ups. segment expect the following a We of margins in should an EBITDA the drop this Overall to sale day rig increase with increase, however, for below $XX,XXX

$X,XXX our fleet. as add level also we traditional or $X.X to adjusted We our margin million, by daily high-margin $X.X expect XX%, International to EBITDA per $X,XXX working rigs regain to increased million, during in roughly growth their course XXXX margins to day. Canada driven the by of a

in of are fourth back $X,XXXs. the in an XX average The to in Nabors benefiting count footholds services We first product given tubular adjusted well Canada putting anticipate Tesco's serve. $X.X its Arabia, at in Drilling as the key markets today. penetration, such offerings million third stand as as work as from as target, us market are margins in of of with We well markets approximately previously met $XX.X acquisition as posting new we expansion. did quarter. quarter rigs increased up of million rig scale not low and Solutions and has rigs from improved These immediate geographic XX rigs EBITDA business an quarter services contribution Saudi

million Rig fourth and improved Tony Technologies $XXX As target the as its adjusted from segment This Russia. markets negative of Canrig the negative two position The technology segment, third EBITDA adjusted by in for the the annualized Tesco's to positive. from $X.X segment $X.X new XXXX. benefit representing itself legacy million by will EBITDA slightly quarter. million quarter development this was such Canrig in efforts, mentioned, is adding

our our on were senior year were pleased outstanding bonds will $XXX quarter cash in as around as ability well at financing be XXXX review million generation. our come. the X.XX%. confidence on we able the to outstanding the was million million during $XXX with CapEx We reexamine we'll XXXX X.XX% the the $XXX quarter unsecured regularly million. CapEx We first years notes, positive achieve, XXXX free fourth priced the namely maturities, our to for million, cash to $XXX $XXX liquidity and investors' $XXX income fixed which generate interest near-term our for was anticipate at address an X.XX% notes. This million, seven-year rate rate our me which in for reflect intended light XXXX. of to target of we let cash We flow for the of finishing Now believe

to beyond plans the further no eight complete original upgrades have have remaining we enhancement our We program. in

All of million by debt these $XX cost each. approximately sequentially. million Net $X declined

Excluding transactions, the net even. cash inflows flow strategic cash two from our our broke

We whole for expect to slightly be positive. cash XXXX as a flow

Our years. forecasts continue over longer the term few to indicate material cash flow next generation

Our to free reduction. cash flow will be debt allocated primarily

We highly allocation. to in his the our that, will back With be turn will remarks. Tony continue call I selective to capital concluding for

Anthony G. Petrello

you, to summary. this the conclude my with morning want remarks following Thank William. I

new our mentioned, financing implies X.XX% William seven-year at investor substantial confidence. just As $XXX-million

a Generating a substantially this positive have to remains debt. robust a reducing top flow liquidity priority. pathway We profile cash year and

Saudi the This in Nabors joint revenue operations We officially scale, and strong position for venture and began brings finally, not concluded recognition XX Tesco, capabilities quarter of it in fleet Drilling but Nabors. just marked Solutions the our to clients. and growth Lower growing of adjusted the gaining into also competitive We is value acquisition Arabia. EBITDA, in the is

to years. of for the highest step As the see far past change. be the these couple fourth pleased a I'm frank, expectations quarter have margins make our there events, my To over lagged XXXX are the as U.S. impact

year. remarks translates our million the platform, for increase year. the high $XXX That of over expect $XXX,XXX Lower of $X,XXX a over to from that, by With SmartRig should will time your fleet morning. value targeted day approximately end will questions. of digits a a you focus the across we Thank working today's to XX level, I the investors. that cost your we This representing a demonstrating our to incremental value single With by on my of concludes grow reach attention. This take our and are this putting margins controlling be and

Operator

We the begin now question-and-answer will session.

next of from Goldman Our Syed go comes question Sachs. Waqar ahead. Please

Waqar Syed

seems then million, how upside more do target, acquisition. little be bit to cost from plan also And on be the that color some the could you revenue provide you synergies, relates of G&A. target, the then and question just What $XX especially? the original you achievable generate a My could revenue beyond on the also mostly to Could the to if synergies, And synergies that? more. side highlight the case Tesco

Anthony G. Petrello

the overlay that the manufacturing business, Okay. product acquisition, Well, about with the they're big unique The as had much which the wasn't a Canrig categories Canrig. all know, was in does you certain really products overlay have thing in product works is hat actually less like and top Tesco But that drive didn't, lower, than than the VFDs robust category. (XX:XX) flow range more (XX:XX) top Tesco Tesco that a did didn't. XXX-ton because drive

there So tubular the they services have then and – is business.

then, to which it absorb without ample of And of So done been infrastructure to take we're overlay much Canrig cost tubular the – really to there box. able in of the set is that the what we've and obviously scale additions. opportunities our corporate has course, incremental way out services, this organization right into is little consolidation of organization manufacturing and NDS of organization so the very

the geomarket rigs point the today. aspects That's of to is and there's want process you what's the little be field operations, where been in doing respect bit to in done is was to point especially that's rigs and a in on going actual versus way you markets of we're moving that have we're and one with Then a those well. and what model NDS So have step in run Nabors business services two the the clients. savings to tubular delivering services different to three field we infrastructure geomarket

deliver (XX:XX) as the part a – to of you our top because business drive just not different we bundle way. we're As portfolio, a have in we it know, uniquely but looking actually

(XX:XX) look top with for the inspiration our tool from is people into if that a now with the So and integrate rigs couple substantially running drive we ubiquitous, the a years want way responsible way rig at rig In a to to crew the drives service. actually rig. the look the is top they're

today. where To will be going that done services, done to to there's quarter. do is to the some handle but with to in redundant tool be set the We're and changes CRT way that some technology crews a disrupt some the model most cetera. a to basically it's typical of idea have hardware, addressed then being hurdles a and that, case moving to cross be the terms And training that way So we'll are there has out is separate the of goes there those second et hardware the eliminated. of

So we believe well. margin as expansion that provides for

a that's be but concept. long the may answer that So

install drives interesting. addition the about that, People may In this. worldwide. Tesco it's and worldwide of to Canrig realize about base base, install excess has has an the top X,XXX same not Tesco

there's rigs. of that a also target top will become – top base products performance drive that's the So is for Tesco a Nabors drives AC third-party market on huge install portion

but growth as deal that AC So the historically as of we just that's well, another market with expanding potential will that focused we're well. come now rigs rigs third-party which on Nabors out not drives so Canrig top

and a potential as product be well. for product like will our Navigator new there ROCKIT So

Waqar Syed

of realize time is synergy potential XXXX So kind more show XXXX like in you that results? a that? do period you see up this and revenue XXXX Or this

Anthony G. Petrello

of year. but and month probably I'd say every realistically, and the (XX:XX) the done get second these there it half Well, I sooner on as concerned we're the late is I'm better far thought as the to products working out

Waqar Syed

the on it's bit. provide to more feels Okay. could And pushed a little steerables, commercialization color some the right process? on It if as rotary been the then you

Anthony G. Petrello

test. Catoosa actually to and think – another what we've customer a had in tests I actually March Well, it's at for going a two

well with we'll we goes yields the see hopefully trial and up. field high then expectations. have start And So gearing can customer that we what and the

So in the half the going to year, have target the That's of tool goal. to to is the We're a real idea second a marketplace. next the customer month.

Waqar Syed

Thank much. you Great. very

Operator

next Our from go James. Please of question Marshall comes Raymond Adkins ahead.

J. Marshall Adkins

steerable, if apart the morning, rotary off any I've a of update, for is the let's further would, theme. could color steerable fell but us initiatives Good there? know robotics, and on seems the missed. you Weatherford Tony, Give tech technology ones rotary of that on just those sense thank you that that you any stay other if JV give managed pressure but on guys. the kind time I and like It lot robotics update, an the than drilling. also

Anthony G. Petrello

Okay.

On with are our working long-term managed we arrangement – and the a rotating kind – we're of Weatherford, with Weatherford is doing head long-term we're mean, that. pressure I on sourcing with a the what working

do So about and MPD we've an Chris? here. talk that's we Chris we're but it doing had have I'll some about what that that, success let vis-a-vis offering

Christopher Papouras

is six ultimately coming, quantify but approach value really MPD We've We've is deployed mainstream the goal to to we're systems that it. trying Sure. our of systems. additional to and take four got the

idea down So we working one rigs. controls, the drive can by across the of value. fleet of our MPD rig still the able tightly of entire And the while their clients that is cost to basically over with to being is we're moving integrating create offering, the

system systems. – out we there that we expect add growth add So to continue some to and is achieve as

Anthony G. Petrello

the the to cost that a provider, all designed, expectation hardware is than a know are about our respect at wise cheaper standard piping is doing provider because the thing as designed SmartRigs probably of XX% configuration least rig, with – least standalone that's accommodate is .So be you concept, an it, Marshall, the the the compared hardware good so. at MPD-ready advantages way as maybe as concept, rig-as-a-platform the will our about basically a that's And it they're done then, in so to... which as one drop And of that with of to this

J. Marshall Adkins

on managed thing bigger going Hold sounds it forward us of drilling little your pressure a there, this bit I Tony, most tone than thought. certainly is deal just thought or second. a By maybe like

Anthony G. Petrello

expensive exact now the jobs, to service. The I right – think it's or service don't is know probably the or the but compared I U.S., there's mean, in is probably so I leading number, XX that. only rig issue like the XX have something Well, the expensive. count so even provider the

J. Marshall Adkins

Okay.

Anthony G. Petrello

to chokes, infrastructure a what once in a have of our we can run our Tier-X Tier in everything. controlling to offering. We're some that that get service here sort a – service, get set a which by basic (XX:XX) the So software the the from level. call do then with fully-managed a and rig, that up margin deal will set the then on we and up way, a be we X additional MPD the number it is one And missions but of hardware automatically is recapture costs first

actually savings really given the we've to the figure operator a savings things, have and operator that the and involves big do the Chris education elects But as a done with to project And potential. him an true with which the high-margin We come if MPD So a confidence. why. way and other them, an that to show and that, it's then will said, (XX:XX) a some are has up losses us to that's process. proposition actually operator we value out calculator what show recently is

run and question (XX:XX) rigs' everyone to say think effective I like to cost is never Managed is – the is pressure been it. it's always that's assuring a it's their our so way try to that is get to would effective, that get everybody The drilling with but operator. going thinks full MPD. model here it's cost to do mission once it's the entry to thought not of That's those to something goal, that's And a all in the the but upsell then because to we're maybe the front here. him, low-barrier overnight, then, hurdles, service. try of of it proven do

J. Marshall Adkins

the other then And technologies?

Anthony G. Petrello

Okay.

I technologies, tool. mentioned steerable rotary So the the other

you what's terms that get here robotics you like It before, those then, products, out. it those – on we're products tool which of basically rotates product, the slides you (XX:XX) well. we talk of have rig And live have of says like it third here heard a quarter this for called version to do get performance the thing top et a of terms our it's of calculates go. iPhone driller. who need product then, which in to cetera. me have Navigator drive the is there we direction called those for where In another then, where actually Waze is turns, of And are, to version rig commercial has driving automatically. what on wells, as Both is for our the of which the There's land robotics, of and testing to the working PILOT, thing. going car And drives tool, is the field two-step and Google is – hundreds with are is have in been offerings an

As the place an AC customer, the you style. a pinion X,XXX-horsepower have – platform in trying we're which generation in is we're to floor then, And and get pipe existing to rigs know, automatic pipe handler rack to We're the with rig rigs rig, process (XX:XX). we on it of yard it's out rig which calling by of a is handlers. with what rig the hoping automatic convert handler our existing the pipe iRacker, a first

to from how a think we to we're which going rig who offshore talks the drillers, acquired. I three second So get mature all before then, several make operation and to offshore And this moves least very them, half their large That that's in testing have with Norway, the is several robot year finally, And handler pipe is been in at how a it efficiency which that is have to including unique is increase commercial. now work, issue platform product their offering of tools contractors, is trying years the in of in their which drilling we right and RDS, that how – same through and also terms the get on automatic for in an floor, themselves. we're testing and very company robotics on the we're for differentiate that stuff the lower interest two large looking to now and or out. around of which to

on of active and but year, the the now. they're of part latter are obviously those goals highly right the So toward on focused both

J. Marshall Adkins

you, Thank Tony.

Anthony G. Petrello

Sure.

Operator

Our Sean of Meakim next question Please go JPMorgan. ahead. from comes

Sean C. Meakim

Thank you. morning. Hi. Good

Anthony G. Petrello

Good morning.

Sean C. Meakim

number parts So interplay the maybe was with well us between International some margin fleet, can type a of more normalized with in the coming be throw as that of around rates, that the granularity I think out thinking the sale some to through hoping about little cash XXXX? just of better a at as profile going jack-up there that give can incremental Is us? moving progression margin. just the to just rigs we there respect the you are you should How for and about

Anthony G. Petrello

Okay.

some try color. overall So give to let me you

which the some half we say the would in of with said, modest declines I to respect additional First to all, X% arena. in margins, see margin year we as the X% first of

is identified that to The you've to one that primarily gain by them. which going in be two growth expect was decline of we margin offset However, due a activity. factors

returns XXXX at had and extreme still producing feel less than capital. were solid was locked on that what is attractive rates very the of the we which First, it through certain the South into at they America entered in were market XXXX attractive But today, extended at rigs and pricing that up returns in XXXX, robust we've we XXXX. those they're in and rigs high renegotiated height strategic and but through and

two and of The and deleverage allow the is, therefore CapEx, of outside the joint them there's to no so effect for high of jack-ups Aramco letter core have margin. This natural they're Middle assets in CapEx, second to will are thing relatively working jack-ups us Those intent at the signaled, tranches. sell at owners better this the sustaining is but before you as East some – on longer are venture, margins maintenance we an average stage. the avoid and outside and

As we or we two to call, said months. the three the somewhere close as next in expect the said, we transaction in

the where occur. that's offsets So

out with not Arabia the daily a to full tightening. market's improve yet as back of there's because hasn't as We're well, the put in rigs payroll couple multiple been factors As clearly partner $XX, Saudi that because prices in on yet other client fleet work in our at engaged margins will in the we're half, able at at the second operating the and far two our with Brent bouncing full discussions and rigs there.

rates. and, we'll think have move we'll have XXXX inferior we Although contracts, to that or they few signed contracts a we higher for many great at XXXX rates legacy as roll, XXXX were

a is when you level, markets, all activity of international talk In about you as monolith, terms International know. not

from the (XX:XX) Russia in and our rigs [XX] the Saudi then top we in another they four of quarter in at one quarter, currently in rigs. from put You've we have heard to to going platform and this separate independently first another. Ecuador, us I We – each expect rig XX about all back We're the about each and a and India, It's quarter forward. XX really rig operate fourth and six up Mexico, higher a say have work as we and currently five rigs, before. (sic) the react those increase in markets, modest and rig country said, on

the picture. you So that gives overall

Sean C. Meakim

a up Thank that, the very pulled just helpful. of is pieces finance those one to legacy forward, of contracts were you would that you nuanced component to One flesh help less, follow-up front think from was some amortizing out you're in that's just maybe but the cash at bit, got prior more with because be of coming some I pretty you – the cycle, it helpful rigs. those to good EBITDA the of you more

you're of at rates, EBITDA between but maybe and them cash. are As conversion a lower re-contracting, getting yes, about think we some maybe

as so the for you see that us give XXXX? sense of to some of through some which some to could impact maybe cash on from you ops And maybe move benefit

Anthony G. Petrello

nominal that's today Obviously, of. uptick prevailing but today out, of on the we're negotiation, a should rollover, cash keenly something less rate those – be basis as the market. those nominal aware are all but is real course there move you as have some to pointed that than Yeah. you subject rate into obviously of the Therefore,

Sean C. Meakim

it. Got

Thank Okay. feedback. the you for

Operator

Our Please Pickering, Holt. ahead. from comes next Pope Tudor, Byron go of question

Byron K. Pope

guys. morning, Good

Anthony G. Petrello

Good morning.

Byron K. Pope

the XX. U.S. to – the have have of year, on up super-spec you're going and rigs. market one U.S. the the the if Lower operators rigs end between out feels XX adding, question It call E&P just ends XX Lower to I market it, more term looking like now

And one contracted six-plus so of but of the think cons weigh it, it? pros cycle? call in two-year we that to on do in rigs, the a base are out term we you I to about your out how saw in do see realize low How we're last rigs the return the starting a might relatively mean, months contracts terming you from those multiyear horizon, terms that range? and I

Anthony G. Petrello

Yeah.

move only actually double all we'd think I of And percentage. the a terming I think as like think I as XX%, to well. the now the down portion, given the out, tightening mid-teen I probably that our we of advantages low is prospect I and out the think and will we to path march the as to it number, – portfolio I think think of cause players the probably some terming numbers

the that's situation in one But why plan. I have the that's Which develops assuming our is the given advantages we're we're of for. think planned exactly is, So portfolio we the in. way we've just where which the market what you said, is

Byron K. Pope

second just And Okay. question. quick then a

the gave potential a PACE you all, get seems it delivered for rigs three NDS and to most, rigs about are probably of services upgraded, earlier. eight of similar reasonable that year them think if on I stats those not think as that the that'll to that have then the As number newbuild be going this

Anthony G. Petrello

NDS marketing a I M-XXXX open that's of the and cetera, in new think very think operator looked services, MPD-ready they're they and strategy that's discussions. DD-ready, is they're so rig and whole when et best M-XXX the every that to Absolutely, those at I the rigs, And nutshell. our see the

Byron K. Pope

Appreciate guys. Thanks, it. Great.

Anthony G. Petrello

Thank you.

Operator

of Please question go comes Sill SunTrust. from Ken ahead. next Our

Ken Sill

on about Yeah. towards a of cash is the of guys. very Is that premium getting here. margins Good just $X,XXX the talking end Tony, a we've inclusive rate that services? were good the year NDS you standalone got margin? Or up rigs. cash to morning, your day It's outlook

Anthony G. Petrello

Yeah.

be about numbers, be of. our to clear because rigs our you our look you aware when our things this at revenues on me Let about there's and two margins have

base of about, extra extra is any give that we're rates first – reported, that indications the other confused. we the of without think casing, services. competitors is rig mean things. basic number rigs, ex-the when ours The which services, we we the the one was run basic and The run giving rate is a which Other some is you pure I – now means our you I'm talking a they some and trucking numbers rate, stuff, no marketplace NDS, little no NDS

I it ought all that that numbers out, be Now are rig think to very rate the split base clear it we've only.

the you and get super-spec when the But under rolling we're term In implemented have this cost leverage terms of rigs rig, quarter. $XX,XXX, how we the there, realize they move Their to initiatives the low contracts on side, then from we the you see rate, additional some we've day to quarter. beginning in also, we on mid-XXs, is rate XX that two average first have as base on the to so the newbuilds. mentioned over and

of to we start-up the the that the got of included us combination which still in a was system have said, But today. and focus that talking lot a the have to midyear. quarter, a to year. by for about the get to gear-up already which roll amortization, You've by well we're of the we're we first of we $X,XXX $X get is end about that cost because targeting as gives today as SmartRigs in remember, costs to the XX $X,XXX. day, up And rates, as path is some costs And the will off that rolling our

Ken Sill

Yes.

So...

William J. Restrepo

smaller Lower so SCR rigs for just rigs, so which dozen rigs. XX our forth. and includes rigs legacy It's not clarify Let super-spec fleet, for well. me as whole It's a or and

Anthony G. Petrello

Now, that's true. absolutely

so pure-play some in us then call per margins – X,XXX issue. mind our you people somewhat all rig that's AC rigs, you that when other companies have compare to rig And average with bear the to

that the So base stuff, would numbers the be on higher. normalized, probably

Ken Sill

Yes.

those are So strong very margins. cash

kind a question, need margins, higher? new the cash the $X,XXX to day other building elephant be is it So enough Or does that guess into backing in rigs? room of justify is I at to

Anthony G. Petrello

to the priority customer for see now new we'd term on have generating first commitments years. three paying XX commit Lower I with to many our attractive newbuilds, debt dollar. down to think respect probably returns Well, I think remains (XX:XX) top to right To close contracts and builds in capital

look our in investor leading capital the We pricing XXs served. XXs edge upper kind incremental I and say of making NDS, when best have domestic see to at have the mid mean, served to sense capital the actually Is for company, make it's vis-a-vis or to a alternatives. to I I mid it look at as or have and increase upper other International to it where guys compete returns. we're robotics, best the so would

say with money what of I of attract make we asset we I is In we And think company for get of get the really squeeze the we phrase juice is overall squeezing proud very to want portfolio out to of a what it. now is proud is I'm the now and hay in we the more out much to juice I it, have. year use with want what out the but as do technology I this to have put mission want can of everything had this year I'm orange. everything assets. I'd base words, we of other to have. to more as we've as together, make much If have the have. our I do

though, So there's get I'm I'm not saying it's not bunch possible, of saying, to there. a preconditions

Ken Sill

has congratulations a company on creating to that you. and alternatives capital. Well, Thank now deploy

Anthony G. Petrello

you. Thank

Operator

The I for very how James ahead. rigs, chances, rate in the explanation, (USA) Wicklund opportunities on question $X,XXX equivalent LLC the platform day Wicklund a M-XXX, - of Hey, any good my that Credit was the rigs how Ken Suisse. there many mean, that. from James Our have comes more Please go I appreciate of Credit asked and today? land Suisse world XX are next Securities question guys.

Anthony G. Petrello

actually precursor real the that warm up our make commercial that prowess about a they happens repackage testament kind a be of maybe we to for issue has it platform. environment. those positioned variable engineering that's bit (XX:XX) the do company. I'm trying is our this the thing. main uniquely requirements that we're a a technology, but of of I to thing had for deliver come in land we've is that for example, drill engineering to that the the to know I the how stuff competitor because existing rumblings us a scalable and us leading also stuff think technology business and people is, works the of That's rig embed it Those platform And on load projects. on of is been the rigs tools. it Of oven scaled on it's But the wider any built in edge here to to realize stuff don't including special in offshore on this the because the the downhole And that not in as sophistication our I'm technology kind? that to another is Actually, make and works. focus was mission. kind but going part than Jim, of that one, to and profile provides that technology to initiatives. people take who get required trying for that to as you And it platforms new think obviously they're do What the the make there to ubiquitous of kind stuff really one the certain meet of X,XXX-horsepower is normally drill offshore, there's X,XXX-horsepower particular, substance that always Nabors

at Tony. that's to trying ballgame Credit be M-XXX of to that. So be - (USA) going rig working working, and example It that Wicklund and of do Congratulations on Securities is the years? Suisse far still but how like LLC second James what an to we're inning constantly the for is just projects many this appears we're contract

Anthony G. Petrello

years. Five

William J. Restrepo

will the that be James Okay. Thanks, Credit Securities Wicklund appreciate same (USA) not but Plus LLC an extension guys, sure margins. I'm it. Suisse -

Anthony G. Petrello

you. Thank

Dennis A. Smith

is Denny. this Operator,

we'll think up please. wrap just question the call, to take more we're one going I and

Operator

question Citigroup. ahead. of Our Scott next Please Gruber go comes from

Scott A. Gruber

morning. squeezing Yes. Thanks for Good in. me

Anthony G. Petrello

Thank you.

Scott A. Gruber

looking see do XXX. your And some is peaked I going here. some like towards count that in heading level you activity about the activity today start was What so inhibit obviously forward do you that? there's XXX moving International rig looks How for fleet? XX, you to abroad need of XXXX. pricing Tony, building that gains Does back gains? new it's about think up to potential base at pricing growth

Anthony G. Petrello

segment you I the Yeah, think have a bit. to market little

where certain is. So which East extent that for gas example, markets which the Middle to X,XXX-horsepower arena, activity is the in deep the the stuff, there's

of second numbers and those the rig equipment be round than think there is that next I out because therefore the other really the newbuild. should maybe a by do stuff the half pretty – those existing next to rollovers any existing attractive, (XX:XX) of every isn't of activity be should work year, pricings there

– cost very – you a and attractive therefore very it's is which by target few market So pricing, competitors. lot definition with have replacement a of

so as not leading it's So but to of out with with robust, market, the yes, edge market, respect it's there's is still the yet. to there, that, – think, respect rest rollovers the I the still pricing

Scott A. Gruber

remind activity in percentage what fleet Can good you deep is exposure have drilling to us Saudi And exposure deep your is, gas Saudi. that in you gas? what today of

Anthony G. Petrello

Siggi can (XX:XX). a is It's the give the Siggi, stuff of you doing on percentage very phone. we're number? high exact the

Siggi Meissner

our I gas the share market is think Definitely XX%. in XX%. about over

Dennis A. Smith

What percent of our fleet, Siggi?

Siggi Meissner

I – in say would probably gas. is one-third the we have the would think I of rigs

Scott A. Gruber

that's back. I'll Well, Thanks. me. Great. all for turn it

Anthony G. Petrello

Thank you. Great.

Dennis A. Smith

you out get call, for close or Operator, for ahead us If us. operator, e-mail got, and today. we feel didn't to out go could thank everybody to want please? any if free And, questions to participating reach the you

Operator

you today's for Thank concluded. attending now has conference presentation. The

You may lines. now disconnect your

Dennis A. Smith	Nabors Industries Ltd.
Anthony G. Petrello	Nabors Industries Ltd.
William J. Restrepo	Nabors Industries Ltd.
Christopher Papouras	Nabors Industries Ltd.
Siggi Meissner	Nabors Industries Ltd.
Waqar Syed	Goldman Sachs & Co. LLC
J. Marshall Adkins	Raymond James & Associates, Inc.
Sean C. Meakim	JPMorgan Securities LLC
Byron K. Pope	Tudor, Pickering, Holt & Co. Securities, Inc.
Ken Sill	SunTrust Robinson Humphrey, Inc.
James Wicklund	Credit Suisse Securities (NYSE:USA) LLC
Scott A. Gruber	Citigroup Global Markets, Inc.

Nabors Industries (NBR) 28 Feb 182017 Q4 Earnings call transcript