NBR - Earnings call transcript Q1 2018

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Operator

Good day, everyone, and welcome to the Nabors First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. And please do 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. sir. ahead go Please

Dennis A. Smith

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

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

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

Now, Tony begin. let turn me the to call over to

Anthony G. Petrello

everyone. the forward. call. your morning, view market our first to quarter the XXXX we the of and Welcome review participation our Good for as going operations of We appreciate

point led like primarily main quarter took the Drilling of our revenue would by forward I another in adjusted EBITDA, Our results to terms of U.S. this results. to step segment. and drivers the

dayrates are and boost First, count to lower XX. oil in the continuing higher rig prices

drilling the Next, offshore, Internationally going results Bigfoot will April increased. In also and U.S. rig our rig increased operations forward. see supported activity the tendering current began MODS-XXX at segments, macro noticeably which our we new other impact platform X, environment. count by on our

grow. business The casing to Tesco Drilling a role our running Solutions acquired revenue key played from in this Additionally, continue growth.

Canada shipments integration our resulted the of Finally, as is Tesco in slippage facility from fourth of Rig Tesco planned. Manufacturing proceeding April. quarter. in fell the month Technologies into in delays Nonetheless,

our to and are confident running both contribute we in position. gains super positively now expect second penetration, paying With have spec technology legacy rig recent investments made in quarter. Tesco casing competitive continuing in the We off. in fleet the years are sales the results our equipment in to our The businesses we

in our margins, units SmartRig continues platform pulling strong while technologies. our are drilling pull to advanced global higher Our through

We are advantage positioned investment. minimal the take improving market to with of

Technologies Now, in was as this million. of rig related all growth quarter's of impacted let deliveries development million primarily the million legacy dayrates to offset and quarter. higher Solutions in exceptional to International. me already The lower this Tesco fourth the performance Nabors support. by XX generated in margins quarter, helped This propelled Peak of the and respectively and Nabors Rig advancing In bulk margins. seasonal Canada million driven believe business $XXX We turn by rapidly of grew orders. revenue worldwide prices U.S. of to deferred all these segments in Rig $XXX the Drilling oil lower was Substantially, the units and average EBITDA declines have increase, Nabors to across in been and deferred results. Technologies an $XXX first integration. adjusted activity operating compares shipped. gathered $XXX activity

We clients are seeing worldwide. increased contracting interests and activity from our

although and for has has rig yet There tightening inflect count high-end growth Nabors (X:XX) expectation call. previous total shifted developing internationally is from our pricing. interest U.S. as to rig Our modestly both higher well, supply

U.S. yielded the a we further grew changes down with organizational by our operating U.S. Now, count. results focus segment EBITDA quarters two rig XX% anticipated for into faster-than-expected segments. the X% a of implemented increase at a Renewed in in ago pace. let Drilling. Adjusted Drilling me bit each drill have

XXX in XX. was The lower first quarter average XXX for segment rig the count with the

However, the the XX majority day XX% previous indicated we boosted vast margins improvement, a gain. nearly the from $X,XXX call, we fourth a of higher $X,XXX margin a improvement a day of to a On by this day the of drove $X,XXX of per Instead day. lower our first day, per U.S. quarter. $X,XXX quarter, expectation almost $X,XXX margins for

our it note to various important the in that our items our with line exceeded were gains progress guidance. reviewing initiatives improvement expectation, the include in on different rig is results, calculation. performance dayrate When margin contractors While

to Drilling Solutions, products Nabors or reminder, do services a and As NDS. we not pertaining include

tools software of day performance margin. account our instance, over $X,XXX for per incremental NDS For

increase margin the We our quarter. expect second lower $X,XXXs XX low in to to the

We the intact our we U.S. daily our segment rig. margin fourth quarter. day $X,XXX leaving commencement rig roughly target the are average to margin to for $XXX Offshore, XX day per our add expect of lower MODS-XXX another a Drilling with

as total quarter. three AC benefit includes currently XX incremental for average a equivalent have lower anticipate project, the U.S. at the to finishing rigs. working day. rigs and With the $XX,XXX whole, XX, legacy We this a in SCR margins, over year the of we This the first XXX

rig operators times in customers an month. call, of to as the larger increase about According of the first again add which XX-rig earlier XX would on customer add with upgrades, announced, since in expect is anticipated the XX rig rigs advanced will XX we survey, plans. initial to rigs between drop up late-February. have eight second we of the saw during half Additions then. of clients Baker rigs of XX additional The many macro forward or lower to this the that pulled third rig lower updated the from I them. slightly we a would rig these to for about These XX- contract. the to first with confident running client year, in our to Hughes/GE and side the feel end discussions. XX support. as and gave rigs half The occurring the remaining We XX all count. term From lower visibility the range, we a On have count previous the a been we either plan surveyed represent XX now lower count, in estimate of that's Bakken over are Four our have above on have signed this XX XX if say and previously another XXXX contracts the we total been added our continuing high year.

may change on Of based or factors. oil course, prices this other

Spot grind what mean So, continues to pricing Nabors? does higher. for this

rolling market contracts under call expiring We day. average per are rates. dayrate we the last I just an for units spot during $XX,XXX rigs term at first higher mentioned SmartRig to off these still quarter had of XX repricing that contracts

day. mid-$XX,XXX per to This XX roll-offs an of per from $XX,XXX low- rigs average range. unit those taking to the quarter, We're SmartRig we day have of dayrates leading-edge the

several the level, discuss fleet to remaining we and our willing months. and As have recent are revenues average in we that rolls will clients to margins. signed longer-term contracts bolster continue to Many

term the strengthening About XX% of market, spot contracted premium lower However, is fleet from we now. a beyond given working to market six months the our logical. XX is on believe

line, is we Bottom anticipate performance U.S. nearly was well full was double as our times continue with and coming We in of as I pleased what quarters. that the the segment. the X expect percentage of it than year contracts length am same be to in the in it the what growing year more of should Drilling XXXX. EBITDA Adjusted last the quarter very this

our rig from count X turn In working segment, rigs increased International. Let's average the to International Drilling by XX net XX. to

X% rates agreed our various just day. average to American over As declined primarily on last Latin new by per extended approximately $XX,XXX in rigs. with on This margin to call, was forecasted our due terms conjunction

Saudi rigs, India rigs quarter rigs and partner two In a Russia. contributed receiving two offshore addition full in to from the we to added

of pace beyond additions count in rig term our to the accelerate near expectations. We previous expect the

in Colombia, advanced one one Algeria. and Over platforms one putting for in the requirements. are to we CapEx offshore discussions are with Kazakhstan, rigs multiple work nominal back in coming Argentina, rig in rigs come in and in months, four two These Ecuador, in we Mexico,

we Mexico number are and in a discussions of Argentina. rigs for contracts, these Beyond in additional engaged

partner will on Nonetheless, boosting our a our our has most new in several will higher-than-average yet two International additions at rig more markets. Drilling margin, current trail Though bottom environment the should rigs pricing impactful certainly margins. of pricing the over SANAD segment. work This be activity typical inflect to the to Finally, summer. others come begin line given from the of

expect downward. margins our the decline daily magnitude quarter. the The startup rigs be of the should another international the of the these With the roughly saw take first and jackups, step to increment in sale average margin we potential of same we

segment the expect exceed a start level margins we the on International to to full generate ample an basis, XXXX's lost On on EBITDA flow. adjusted XXXX. and we cash year the half ground However, of expect during regaining basis second

not nearly typically margins the $X,XXX and seasonal fewer Let's we quarter. per but segment. rig, did Compared the the quarter of double this quarter Canada fourth to high the same turn one Drilling for to had of marks higher. the Canada disappoint, EBITDA generating over QX day of XXXX, adjusted

was for with currently XX. seasonal rigs, quarter XX Our count the to though, we're the down average rig breakup,

quarter. We for expect XX average to second around rigs the

the differentials, decoupled XXXX. somewhat We rig lower oil still, wide and relative XX. activity and mix gas-heavy Canadian market anticipate more strongly positive margins the improvement Given however, post from to the has both on breakup

meeting for Moving $XX million quarter on EBITDA our adjusted run quarter of fourth to the $XXX the of set million run for Drilling XXXX. a rate XXXX, after target we fourth rate Solutions,

our EBITDA trajectory XX% fourth on margins initial lower rig Performance acquisition our quarter continued Tesco quarter with that quarter. stayed with first The from the software offering. automated lower accelerated the with pickup growth are more. led per the from In of in adjusted services its across software, fleet, daily Averaged Navigator way. increased gaining new full major it drilling to tubular working in and running the Pilot our another to XX from A the $X,XXX. we rolling and margins, of additional we MPD expect been steering directional early commercialized and out customers two our has Navigator. product growth Pilot commercialization increases stage offerings, XX,

tubular new operating running per man and ultimate in from casing lower soon we rig. fleet. Already, tool crews Tesco We at rigs our our with to the four services of our is sales. of one greatly more in running man test are automation third-party rig design Mexico. through count We to services quarter. having no Gulf transitioning one own the XX roll capital to the than growth to running integrating from our seeing U.S. Navigator goal many three business is This is shift the with test. to design Nabors per This efforts. and CRT also tubular see additional We pickup incremental anticipate finalized are for will out into field Pilot from effectively currently grew both the repeating XX to and jobs the costs get entire RigWatch should rig The for cases. in the shift

May customer. South a Our this anticipate We're and planning major test commercial rotary Pilot as late year. expected the for a steerable follow-up tool in in first well be it performed in Texas will

of running in are As to compared XX lower or XX% rigs penetration our last we XX% NDS second now we Internationally, NDS Saudi services started five quarter. directional more Arabia. job gauge over our drilling progress,

services running strong Tesco had tubular operational Our the internationally. business the with it is history maintaining

As said NDS of phase before, I next the be International to a growth of we expect this driver big business.

whole, Robotics had Tesco side. impacted results the orders. encountered with loss in timing the by and to shipment development significantly orders expenses during Five to division, The Turning the These segment, and the sizable We compared steerable shipped been orders which quarter. of came the Tesco the for Technologies experienced the disruptions fell four from acquisition, Technologies prior Rig ship issues Calgary this has the Technologies, to a some legacy Rig tool quarter, legacy a rotary the the related as manufacturing combined did delays in equipment period. not large facility as April. from

that substantially been all this rotary and territory. loss these The deliveries commercialization. efforts strides reverse have of robotics steerable to into expect make towards we quarter next made, Given positive to continue

the well The target. our tool the rotary precisely rate I as penetration. was successfully Pilot a completed at As steerable targeted per of for tool delivered mentioned,

recently automation we order will engineering This our system to deliver to Robotics project, front, for in Sea an contract for North One will encourage automation videos into offshore full website. retrofit expect automation for a offshore. large expect our two we existing view operation of the mid-XXXX, robotics is installation. Technologies on first signed an On are we There of which for line operator. what develop I our an you our platform a

triples concludes build innovative operator is later PACE-RXXX robotics our is will a and built contractor client want other the on William doubles, which scalable the view technology. be any quarter's readily these expected this This rig without The review now you and would videos, After land why you my which is new a to rig may provide quads. robotic incorporates rig, or thoughts is to delivered and rig This outlook. offshore year. system wonder land single, to to a or or results financial comments. additional the

William J. Restrepo

or loss to continuing attributable Nabors net Good for million share per per $X.XX $X.XX. quarter from transactions The million Results morning. of $XXX $X loss operations share. the included a costs of from strategic represented of

effective income, for with quarter in rate included Nabors. resulting expenses the In in tax addition, non-cash jurisdictions negative pre-tax negative a tax

$XX million higher first in $X.XX than The impact. expense fourth, quarter a was share the tax per

continues this legal towards We we our expect position to revert as move income to pre-tax breakeven structures. adjust and

fourth The first compare In growth a the NDS. Strong in results, quarter. of fourth of loss continued the in our $X.XX the to $XXX particularly results drilling continued America, million or North in share quarter general, quarter. and overall trend diluted results per

picking is still pricing count fast, rig international Our up although lags.

higher to XX quarter and Drilling prior $XXX fewer rigs the provided the drilling our compared the to improvement. despite dayrates work from $XXX first Average was days lower count a a higher issues by million quarter. immediately most delivery. quarter in in for rig X% the revenue lower logistics increased for facility. sluggish Revenue of quarter, XX by rigs, the manufacturing upon as the it million PACE-MXXXX of from reflecting the in X% Finally, newbuild X.X our and $XXX shipments equipment to as in we remainder put rig drilling U.S. count, temporary increased at Tesco Calgary of operations headwind, million

were driven experiencing The shipments count casing have performance largest involved began sales. the and previous this to In facility to second Adjusted newly million, manufacturing International incremental sorted for for accounted additional higher Delayed eight XX% was noted million reaching were running both by the robust extensions our delivered in $XX $XX increased expectations. delayed decreased Rig improved and exploration by XX%. We rig fourth drivers lower grew revenue due Tesco to season. out prior and The are as million. fourth call. the dayrates by million The $XXX XX% higher on the the day. revenue lower quarter million, average along Drilling, Technologies and March acquired increased seasonal in revenue in Drilling in XX% activity, miss. million. rig from also straight been results. Calgary expect usual by higher our breakup EBITDA to adjusted in the revenue million quarter $XXX lower $XXX Drilling to be rose the in revenue per Solutions these revenue driven from incremental related of put $XX and increased by compared logistics Alaska Canada America with tools the for to The U.S. Latin drop services XX improvement contract primarily rig units work by for margins as $XX April. daily declined both an from we as increase on in to $XX and legacy back the margins, primarily X% Tesco increased already our issues quarter, winter million quarter. by to EBITDA activity, our XX% in XX to we shipments QX in

to to months. just XX the Drilling lower quarter. also $X,XXX, a of our for XX for dayrates from exceeding far increased day incremental just see six expectations Increasing As fleet supported of lower over growth at initiation growth we April. steadily of will the the XX upgrades, This forward, the material beginning the drilling we to margins. shy MODS-XXX the lower the activity from by look for our should next joining expect fleet the a boost average provide margins be working $X,XXX eight under

not as per saw margins well reflected improved same to reductions this We an The continue, repairs expect costs. maintenance improvement as in additional the at pace though day $XXX substantial we revenue our quarter. this and upward trend to

reduction our spot support also We continue from startup benefiting rates. to costs. field, addressed structure market in higher the operational Rigs to reprice in while a amortization

this rollovers firm expect as reprice additional the We to favorable endure fleet. continues join upgrades contract dayrate to and to market, trend pricing

demand seeing While Texas remains upgrades is Bakken region. are the the which rigs, incremental in in absorbing our spec and tightest we the market, Rockies super the for

and behind cost higher quarter in still time, this are the us, Although $X,XXX expand beyond this our are a the lower most reductions improvements believe year. possible. dayrate, second in $X,XXX day we of further XX quarter fourth margins should average of At on

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

million we reminder, XX have line a million and International to of rigs fewer had price Drilling of margins a by $XXX quarter additional As with revenue first what by four were mentioned anticipated. $XX,XXX in total rigs XXX by as $X the lower we reductions than working the the quarter. Adjusted declined more as EBITDA in before offset in were in of the today. approximately days

and these depending of worldwide divest average third for the million but in approximately quarter While would EBITDA quarters. three non-core, working grow of future, startup the especially in $X If second to on rig our higher will of second the jackups impact we the the a of the of able divestiture. timing quarter second working are we multiple this potential sale margin segment decline count and expect this our jackups in imminent adjusted margins, rigs rig count

a rig million margin startups increasing EBITDA to thereafter. quarters by and $X.X and in adjusted for doubled adjusted third we growth internationally, another day. million, than the per segment to driven more strong from contracted Drilling we $X.X in seen the second more the Canada $X,XXX to $X,XXX rebound EBITDA forecast generally the demand Given anticipate

Saudi seasonal been the to beyond this us. count $X,XXXs most anticipate QX, million, services spring XX for business in such fourth bright and we works With has from Arabia as of immediate of rig quarter. posted U.S. rigs the mid our an scale the in quarter self-sufficient difficult is it as a trough many of and and breakup, $XX.X million rigs in up the breakup. spot key adjusted in second contribution a average While approximately forecast segment margins EBITDA of tubular Drilling us The capable Tesco's Solutions markets has an acquisition $XX.X through given the

Rig We million of also efforts, this to annualized and in in several technology negative markets. our now presence $X.X negative XXXX. segment quarter EBITDA quarter. from million remain for a million adjusted $XXX confident EBITDA The of Canrig by Technologies segment, the fourth have dropped the in target first $X.X the adjusted developmental representing offshore We two

second as this the cause segment positive Given be underlying deterioration, the for of quarter deliveries expect we now occur. deferred the to

$XX EBITDA contributors by to solution and We anticipate expect for quarter by fourth Canrig year. Technologies being We exceed this division the our segment the to adjusted million of rotary the year-end. positive segment steerable Robotics

generation. million. and The first XXXX quarter, cash as Now, in annual was CapEx in with and still transaction more $XXX of the CapEx the an for review that million. the incentive to $XXX and liquidity interest major our first our $XXX million quarter, acquisition, our issuance We're also on capital around increased associated of role. recur payments let cash $XX costs me was quarter's timing of increase operations, SANAD second the Net payments working Tesco a played the which by than of quarter with associated related such targeting for flow. expected to bonus the items was not debt collections weigh first million bond semiannual slower should other fees anticipated. initiation But

sale million With only of would this subject XX% a split and the $XX cash possibility lockup. jackups our consider capital about projects expect with XXXX. invested. a the year stock, XX% flow pre-funding and to We So of commitment the on three-month long-term full cash quarter, receive stock upgrade we return for customer expense, we closing additional with positive high would undertaking upgrade the still for

which strong recovery with exit potential International we operating be the flows. allocated turn to material primarily expanding priority from cash critical I positive. we is be With activity, that, our generating along should to and sale, to Tony bring importance. its concluding quarter start very margins With his U.S. few back Solutions Rig the top and Excluding expect expect generation, and proceeds in cash this Drilling This debt The call jackup to reduction. year flow second MODS-XXX, aware flow next a cash for the we're much annualized growth of continued remarks. Technologies, will of years in will

Anthony G. Petrello

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

generating As With expense next positive XXXX quarter flow we priority William the minimal interest free cash from cash capital, results, noted, our positive remainder a during remains top the potential contained flow year. proceeds sale. increasing and working anticipate operational of for cash exclusive of any jackup

business undergone improvement. Drilling U.S. a clearly rapid has Our

as summary, technologies power pricing the the and my our Thank drill great we the in In things We EBITDA with converting with you gives incremental your of year-on-year. recent uptick rigs expect and contracts in to today trajectory yet rigs its underutilized regions although that We outsized see (XX:XX) operating internationally, in bedrock sizable incremental Meanwhile, of now this here much activity. That inflection. the demand upward wells the see With downhole that, existing increases this we will point us will this questions. time attention. to remarks for approaching provides emerging leverage tenders saw sometimes follow is continue topside confidence to business concludes morning. I improving of your us that to take adjusted have contribution future. best-in-class pricing and growth into that all to segments is XXXX. U.S. across we Getting with anticipate

Operator

questioner Robinson Sill will our ahead. Humphrey. question-and-answer SunTrust is now session. with And Please first Ken the today We begin go

Ken Sill

Hey, guys. good morning

Anthony G. Petrello

Good morning.

William J. Restrepo

Good morning.

Ken Sill

time pilot once busy Is outsized I'm rotary services? schedule year taking going of earnings. out other an it out to on steerable. question on other got be going thing assuming ones you this that's I Thanks commercialized? per your test and coming. day coming OTC impact have for to for that next XD It's tools the got gets more the good margins for the (XX:XX) a

Anthony G. Petrello

I Well, say, absolutely competitive if you offerings, would look yes. at

depending and You are the to tools, location-wise. lower know in who $XX,XXX on what upwards $XX,XXX rotary dayrates the XX of today steerable for

a to so, line. part drops the that equal substantial a Those of are And bottom margins of the margin rig. basically to

reasons why the tap focused of one on that's that. to to into it, try So, we're

Ken Sill

Okay.

I yeah, of at. kind what that's So, was getting

So, significant a once really you deployment driver those to be going else. top everything those tools of are of on see

Anthony G. Petrello

That's on target it's list. why our

steerable we here. tools gear-up control have to out in of number course, other And way Rigtelligent is where tool placement. long will et help rig that's and our objective operating be the cetera, help Nabors system more with the effective we the but terms integration Of the that believe a point actually building of wellbore rotary the system you it with will guide into

other on rotary So, optimization another feature that we're focusing will that our that's distinguish from people.

Ken Sill

might particular Okay. And seeing that calling a any of Is just a improvement or here. actually kind outside area you then the follow-on count faster? demand, Internationally, some of there that the in improve question. guys on are bottom rig Middle East looks better

Anthony G. Petrello

sign in the Argentina in one and we contracts indicated to in call addition remarks, we I as Colombia, did and – Ecuador. four mean, one in on Well, Mexico the in

in rig is, was X-type improved play search And about Argentina Colombia, active. is Latin those shale actually the the don't (XX:XX) they're is country. And know more for incremental pricing America help adds deck which U.S. we Colombia, Obviously, Latin relocated rigs, control as for a American So, Rig rigs. U.S.-style because and interesting in really rigs value rigs marketplace. that you about down exist X actually thing for looking two has in ago, the – very years and Muerta – focus that been Vaca looking drive

more is region that again which the think of alert benefit into whole rigs, falls our I higher-performing So, to becoming bailiwick.

Ken Sill

And then what about the business. platform rig

any to upturn general? or for is offshore, in better chance is You that – of said, this the offshore there showing kind

Anthony G. Petrello

shoots. for platform – there's true and it's our rig, think one I Well, rig, contract have M-XXX, yesterday, staffed previously there a new we We signed green just been extended rig. a

And green M-XXX that going our going is of of shoots. forward. rate that we increment full on on, we course, seeing so in excited a you'll very obviously numbers So, as some are X, are see and April

to platform market signs think is of shoots. I yes, green beginning So, some show the additional

Ken Sill

you. Thank Great. Okay.

Operator

Marshall be will go ahead. with Adkins today questioner next James. our And Please Raymond

J. Marshall Adkins

Good morning, guys.

Anthony G. Petrello

Good morning.

J. Marshall Adkins

a is integration casing but seems that The tell then we coming of Tesco in adding how kind us this Tesco had stuff hiccup the like integration, quarter, this along? integration that, to And running Canada deal. big little fairly a of is

So, going of forward? relevance the you comment could on that

Anthony G. Petrello

Sure.

as vision we things services. the and was historically, is the As ability these approached (XX:XX) future platform before, the our services, so we're that at never a were lot solid for the to rig that drilling on looking said industry integrate only because – had of

So, not we is – the rig, service, terms rig. them, in believe part actually And just the of of you being but that services, and running there's that means people. part some of the logical economies one casing bundled get it's (XX:XX) of

with without rig, we a down more can it to four-man typically, it's and, person example, – in integrated think than So, no one get that we maybe crew, ultimately, for if the person.

new we safer. to that manual. automation is operators cetera. We them least the of view And at Our be not design the a drive we'll takes parts. and or for show in third et able think top quarter is process casing of slow, reduces moving on going had be that streamlined, the slower to top think Tesco proving advantage way the rolling to that streamlined, much of of more and number go certainly as that we're tool It's the easily now (XX:XX) of reduces out – we a than faster, takes that CapEx, have the faster drive up, advantage ringing of it's have

a of marketplace rig Nabors now in which rigs. count. there position So And a And Saudi XX XX jobs we've in XX% about the our on good rigs, is in in today, jobs about third-party we have bunch on Arabia, we're U.S. Tesco. of

So in expand focusing U.S., we'll well. position think our the also while Saudi we're we try on as to

concept. overall the that's So,

J. Marshall Adkins

similar, And somewhat All I right. kind question. of related a guess,

the this labor in Your like down cost lot the unusual down came a across which heck the seems environment? going on getting U.S. you you're everyone most the way. know have you is other rigs. And industry, issues. since we are cost reactivating How side, is else these It

what's some us color going give there. So, on on

Anthony G. Petrello

basically, that said see, it as mission much to and look the think every – start focused down to do made running the possible. Supply now it as Well, segment a top discipline of really Chain, to in set all have I and infrastructure I'd he's U.S. a was workflow out trying into was it it, we they really to a you and Edgar piece we've and taking Rincon, happen. company it mean, – of nailed to and as moved and like it we of I ourselves we Operations guys real we U.S. he it. is Operations, U.S. say, just brought person and the just a the our at The him responded Head approach. simplify we and it, our running on Global so bottom-up

similar that company there's at I successfully point still I the not think low-hanging think there's was the fruit today. beyond, this more because initiatives and our some mission, say in we areas. some little there's our go. we're other I But and also Obviously, would team And But said before, so delivered. front mission to that's Marshall, as expectations. the that

in where that on – asset think because more at have flow doing our capital, is right I last Nabors, that. of generation. the want we the unparalleled base And focus that point got – asset the is we the to extract on I from higher total call, existing and now. and think, cash we As said more return base, we And an we're

all the that we know And in to I the think have SmartRigs our internationally the in marketplace. I U.S., rigs best none. internally, we our – second think franchise

much what So extract focuses are guys' milking today. can as doing the from is that's I'm the I we and team having it, that can everything and as where interesting

J. Marshall Adkins

Thanks, guys.

Operator

be questioner Marc will And ahead. with Bianchi go next Please Cowen. today our

Marc Bianchi

Wanted on similarly clarify did from you. that just Thank quarter. first, one international do the jackups the what they is get $X about done, excluded the margins to thing, correct? if the the to guide. commentary sale William, you in that first Is declining million,

William J. Restrepo

actually. Marc, is is margin that think I the decline, what driving

Marc Bianchi

Okay.

William J. Restrepo

It's double driving the just what a quarter. decline is that second not for is It's whammy. the

Marc Bianchi

Okay.

count And the where is that you maybe slightly I Okay. down that of then, implies flattish guess, quarter? just or were rig first sort from in

William J. Restrepo

third big We're going quarter, the the rigs the fourth. in second but is additional and growth to in some get the

Anthony G. Petrello

about it's is think I maybe...

William J. Restrepo

one. there's think I

Anthony G. Petrello

the one the and rig quarter, other in second referred plus ...one in quarter. the we'll then those to, I eight here contracts fourth and start third

Marc Bianchi

Okay.

second also extra from I I that quarter would basis subtracting, one in a three that the rig be Tony, guess, operating And on Okay. right?

William J. Restrepo

Correct.

in The in net land one quarter that – So, gaining plus average number. in (XX:XX). an losing the rigs three we're is jackups. one-point-something, includes that but Right? reality, on So,

Marc Bianchi

it. That sense. Got makes

mean flow flow cash there, if that there? minus Is define CapEx, cash you can Just vocabulary us you flow? what you the on the that guys EBITDA minus comment, operating Is operating cash then could. remind CapEx? And Okay.

William J. Restrepo

For quarter? second the

Marc Bianchi

Yes.

William J. Restrepo

of for shooting very to we're deliver quarter. in the net of sale stable So, debt a potential quarter the impact second jackups the before hard second the

Marc Bianchi

Okay.

JV I there could, the think Saudi it's be one add doesn't occurring That's and any I spending is And more, the it as can going we have and us I help or just any you JV that as suspect you if consolidate level JV, Okay. understand? incremental the right business, Do necessarily longer and to recourse with occurs CapEx that within think occurs occurs. the term But would I that to debt that the to then at that great. borrowing Nabors.

William J. Restrepo

forecast, the right. Marc, in need that of debt. we're over couple not really, for But next have any our You years, seeing,

In be fact, cash. to the going is quite flush JV in

Marc Bianchi

turn Okay. Very good. I'll it back.

Operator

and LLC Securities James before have have just it's Jim Please Suisse in and if the I'm about load The would And cycle to of the free wonder impressive. making over year total ahead. you if (USA) morning, last Credit and cash guys. you enough - pay-down. generation Wicklund cash the will anything generate next again Credit today how Suisse. second to XXXX to questioner half be at the is I enough to thinking Wicklund with look roll we or for in flow there's go strong long Good the debt meaningful do. a

you deleveraging generation you sell, assets can for my can or anything do so, question plan cash the the guess, next flow only free if is else reduction years. debt coming to the over there do need I is, So, is transaction? I'm wondering just

Anthony G. Petrello

going laid first all together that forward, about out put and we're see $X where outlined excess would we've the the when the say year, think by you in segments, XXXX you all of you thinking I can is, that a the see and today EBITDA. direction I pieces billion I have we've of think roadmap thing of going to

go host Okay. one. I'll them. about, thinking is let a other That's other obviously through the we're but things And point there's I one think that of William (XX:XX),

William J. Restrepo

of our term that We're on obviously, some our credit the looking so to and working think obviously, all potential is I facility. to modification and, things we're and on time, we're of out. that at already talking the that opportunities do our bankers So, we – maturities extension also revolving shorter-term

it Suisse I would say, more the think roughly LLC better equation. generation expect parts of, the we to said We billion be deliver years. XXXX, we the that the a Okay. company a $X rate over debt over in allocated is two-year enough is the somewhere $X do the of in will in cash care expect our and don't debt to that that that reach that over James. So, takes And Wicklund towards two couple dent two years, XXXX, of (USA) next the (XX:XX). think period, cash market next don't situation put I objective, years, a our tactical which we billion of reduction roll James are those of will much free And net Securities we flow to certainly low but - final net meaningful debt. before make on our Credit flow the over we'll

Anthony G. Petrello

Credit (USA) Suisse Okay. - LLC Wicklund James Securities Yeah.

Anthony G. Petrello

for the a I not have us like other the to things versus in portfolio. looking see stuff doing what would in had also of portfolio portfolio track always to record our We've say, some we're at are that. logical

can Suisse find industry So, biggest like in Okay. if appreciate could, in days of because my market we issues, first people. - Credit looking how couldn't people. helpful. opposed I'm needs personnel, Midland solution paying doing as And doesn't we're is where industry think know as people course, soon to will people, do a What the we've this doing doing James might more the of an I and well. be terms and impact? things or have rest do efforts by history people be the people Everybody I assure revenues and LLC the just lost there's to adding do just rigs, is more that you're is these that. around. at curious unemployment solve automation (USA) my companies and in of cycle what little the and one that I actually follow-up, Wicklund you're enough individual just you the to Securities problem. if bit we move a X.X% of trying on paying Permian, to Nabors of That's that to the $X this to will

Anthony G. Petrello

the the lifting thinks on floor when drilling one interested to reasons the of up pool. thinks we'd guys to mud full labor of access a industry, they're for and Today, of heavy why kind that's obviously, of a different automation and this is new like people about the open bunch industry. (XX:XX) outside, they everyone rig we're picture Well, of a in whole one have

automated especially But should so (XX:XX) why an the in in automation, we're we meantime, it. of get to challenge. attracting much think do we I with host a open can a so, whole extent because actually ourselves. And mean, you're is about them training is that people labor we floor-hand level up the different and so bringing force, keen not roustabout the floor, the at drill which

stay but to issue. retention is they're and and training speed sure them the bring motivated focused, We having challenge. real make up them it's trained the and keep and that's to get door, can So, them in the people really

stuff that. schedules daily like the other pay, things of like apart matter, from work – and so, And accommodations niceties

to cost that other some couple next as – I if during mentioned quarters. know have we don't was roll our remarks my not, in so, pure And costs or we it the amortization turned now prepared do well. Permian, And opposed cost in will out to dollars have but focus will some as have like increases people that, on a in we've that as structure

company. the has that labor, rightly But not to will any the think and material pay. in our the that on It be of a effect on on the out there's pay, you point right getting costly pass be a which focus can't And training, of and is through customers. think we and net retention, numbers, to So the on plus I much event people. be more one year just that's feature Wicklund interested LLC Okay. Credit so James what's Securities but one we That's completely a we out And rig in never that put can the - we're Tony, run to, question you a person? do we'll that why can by as a rig put be Suisse a front the for hypothetical person? automation year by (USA) be what that hold out run

Anthony G. Petrello

it'd be never I one said person. Well, that

fashion. direct rig and to an picture a I the website to I'm floor all be it'll by That's be – tripping on done offshore automated. two think at for you rig that's floor – see I'm and and And your be you're itself going will going you run direct can think plan on soon. I casing, relatively hoping the tell I touch right run it, there an pipe, need one on going would and won't see et look I anyone automated mean, all cetera, a I – totally any to videos you. the to now. you're for the that would driller, working to And I'm to is

you be some final also it then contract I operator a it's a in will doesn't think, bit illustrates concept. which what announced and yard we're that as a that We're we redo rig on today. along to platform our in major an the rig The (XX:XX). we show single land automation and a without with operate changes prepared – it's rig how just That's you talking actually of video something Sea year-end. that triples, exist with of the the North customer. and remarks at you'll a similarly, now, like, that the out (XX:XX) engineering and it. before is going core to to doing lines will is And that signed video – see right doubles And our with his have looks there's to technology

that the drilled yard. is rig functioning. actually the in actual It's rig. So, in It's hole that's an video

The to are scale oilfield. say So, industry it's science. like technology science. The real. other it. the it rocket is, This robust viable. the Those is to is I we make know is enough the is to challenge rocket automated. would challenge We Every is it challenges. it's for know not but not

XX focused now you it. it's makes new for brakes. way kind million power $XXX on drillship, would Our It new I way would thinks you build no buy same rethought to why a and (XX:XX). industry things, and is sense. doing without the But years. the Mercedes entire to mean, you it today, now And analogous of absolutely has I no (XX:XX) say everyone power people jackups, that the haven't the automation. of you building right Well, you're steering are in and you process

our mission is to change to try So, that.

the if is. that's can it we'll it get we and out see But So, focus where scale there.

Thanks, – videos going some guys, Securities at - idea process. So are that's the to Excellent, is I'm saying focus just in you it. our we're right And LLC give now. of Tony. (USA) Thanks, much. not where gentlemen. where Wicklund overpromise Suisse I'm Credit the James very

Anthony G. Petrello

you. Thank

Operator

Please go Bernstein. questioner be next with today will hour Davies And Colin ahead.

Colin Davies

the wondering the up was can we in margin Hi. give Good the step on morning. if U.S. a us color as walk little you more I

some much cost obviously it think have how platform the that over XX you you $XX,XXX said is just in? where a much is coming in, you the made it coming rigs guys gains? blend improvement ongoing rigs offshore big of sense is think fourth much quarter. get lower I to of how think How pricing? you by the Trying a So, potentially day And

Anthony G. Petrello

$XXX an have to to lower occurred think the I costs think it's quarter a number. the and quarter about pricing, better is a about I $X,XXX lower target may what – the due improvement for lower you quarter just and $X,XXX which obviously, equates that going we we're our $X,XXXs to increase can roughly that. the low an costs, at than you are $X,XXX I to $X,XXX rate due to saying about XX, XX, this average to by role look think quarter, And was see fourth (XX:XX) we're separate saying, XX, of out (XX:XX) to exit diminishing be quarter number be And here. fourth next as the the higher to

of lot the said rollover more to those So, expecting leading-edge contracts a from older to rates. we'll (XX:XX) be we come

plan. the that's So,

Colin Davies

sense on just on portfolio? coming coming how the the the side, acquired few next the the that and any Tesco And the of helpful. give from can rig that's services rigs? quarters over of solution to you progressively from is And Okay, that is us the growth much as how solution of to then much NDS you're it growth into adding that Nabors underlying the

Anthony G. Petrello

an like have number, but something is exact my that. don't I guess maybe, XX% around

William J. Restrepo

Right.

mentioned. I lot to running a of all it think the $XX casing as the EBITDA in $XX of is rest services But Tesco is should the and year-on-year expansion markets, add million Tony something million range into organic. of international

drilling We the rotary performance getting our in new and are for offerings, towards paid expand steerable, directional of the in to including internationally. products, the the And software now jobs new our continues U.S., end Saudi year. coming Arabia first

Colin Davies

great. That's

Anthony G. Petrello

really said (XX:XX) the thing is that the which our one or a with XX% is I'd of is penetration services the think more bulk you day. the are rigs, those when are about on rigs that contributing So observe $X,XXX NDS, we five –

that that are actually rigs $X,XXX means day. about adding with average those an So, the a XX% on packages

pretty get as number. on expand much that's as possible And mission that our And meaningful rigs. a to so, is other

William J. Restrepo

tell another of XX the And are XX had services. at XX. every casing the them quite which lower last we me, look I'll is the you X in running statistic, week contracts, last to So, contracts in that awarded interesting

acquisition. can through the and the so excited integrate revenue we our why that we're about to and platform. see that's Tesco from That's So, kind that of now how we're rig starting acquisition penetrations the pull into

Colin Davies

you. helpful That's back. hand it will pull-through the Thank is I see to how working. great. That's Brilliant.

Dennis A. Smith

five left about minutes more got one We've do here. question. Let's

Operator

will next from question with Tommy go Stephens. be Please the ahead. Moll And

Tommy Moll

taking morning. for my Good question. Thanks

Anthony G. Petrello

Sure.

Tommy Moll

for on just a outlook free you housekeeping the XQ free ex in sale positive for and item cash cash Are year? full your first, expecting both So flow. flow jackup the

Anthony G. Petrello

Yes.

Tommy Moll

It's just you're on folks based And already who Okay. customer get to plans or Great. it macro or of the public bumping QX lower on the round side, And rig thinking up Do that a discern increasingly optimistic is XX. we adjustments hear the late QX? and are that base? to today number is your assumption public terms side the on maybe any been drilling maybe question. you out versus trading the your as in side the rig in to about where looking count with good continuing on private at count WTI CapEx then, to in specifically, on difference announced climb into have budgets more Thanks. here

William J. Restrepo

Okay.

account together that in have participation sort – CapEx of and intelligence give it's clients survey. good on rig of lower less specific do have over So, a market than get. based our on they we count surveys XX, those in for the U.S. us the the and We in third

how projecting So, customer market. we're to that reaching conclusion. total our own the That's we're base

Tommy Moll

That's me. Thanks. all Okay. for

Dennis A. Smith

leisure. And now. up and wrap us free thank the your to feel joining question Ladies will at or We call answered, didn't for we us. gentlemen, your you e-mail if us call get

Operator

conference is Thank concluded. you attending now presentation. the today's for And

disconnect. You may now

Dennis A. Smith	Nabors Industries Ltd.
Anthony G. Petrello	Nabors Industries Ltd.
William J. Restrepo	Nabors Industries Ltd.
Ken Sill	SunTrust Robinson Humphrey, Inc.
J. Marshall Adkins	Raymond James & Associates, Inc.
Marc Bianchi	Cowen & Co. LLC
James Wicklund	Credit Suisse Securities (NYSE:USA) LLC
Colin Davies	Sanford C. Bernstein & Co. LLC
Tommy Moll	Stephens, Inc.

Nabors Industries (NBR) 2 May 182018 Q1 Earnings call transcript