NBR - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Nabors' Third Quarter 2018 Earnings Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Denny Smith, Vice President of Investor Relations. sir. ahead, go Please

Dennis A. Smith

a as Officer senior of President Global of and will today to in the With commentary our Sanchez, Canrig; we our Executive Operating these include download Thank quarter's call. in members joining our Since for us and these Today, Petrello, Meissner, their our available, and with today support everyone. addition of remarks, into Chief Restrepo, the in our slide myself Relations Siggi website management XXXX Tony, well. perform team. Officer, both the Chief the much along Financial our replay are of John Drilling Organization; customary William third other meaning forward the with earnings forward-looking by Securities to posted Such Tony in filings risks statements markets. providing Chief President, section subject Instructions Chairman, conference we may the on our and you morning, within William Securities to Nabors' of Exchange our constitute this and and statements with as markets forward-looking webcast are within Exchange Nabors XXXX. as and Commission. of on uncertainties the expect from Nabors for perspectives expectations, call are and disclosed quarter format for Officer; is a how and results, Good of deck certain will XXXX and Investor time-to-time In they the Acts the follow our nabors.com. insights of

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

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

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

Anthony G. Petrello

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

Our results for segment. significantly, reflecting Drilling in of U.S. The our Canada the primarily and seasonal to third rebound outstanding Drilling in quarter the improved progress also our contributed improvement. Solutions performance

in by jackup our was Rig upward consistent anticipated, progression divestiture results. sequentially. the impacted results. International our Technologies very am flat As quarterly encouraged the I

XXXX. despite of continue quarter deliver growth. quarter Rig third it for contributing strong We X% up in the the was sequentially. This improvement our yet million, improvement to maintains EBITDA Technology trend the segments $XXX EBITDA second started our International to and not

year, still Although a increased in results generate quarter early arrive in next the our expect International trajectory positive total cash we and company free should to beyond. fourth flow

favorable the indicate Continued activity. segment. remains upcycle improvement Rig price a than driver Nabors' our prices, solutions International U.S. early strong At they more joint operators any drilling offset environment. increased current main our oil for in and softness have incentive industry-wide The Technologies should to Drilling, in industry

East the shift spec In upgrade the demand are supply sustained cycle XX, rigs. in also to of Middle Latin for legacy We the demand continues most the types increased see in the away rigs multiple the highest and constrained markets rigs America, Internationally, customer a we from a of see East. and globally. Far including strong demand which Lower drive

XXXX. for been International in earnings XXXX. signed awarded And the major we Saudi During upgrade rigs. our have contracts our two Lower In venture have September, call, joint contracts markets Since milestones. SANAD, for five our multi-year the rigs upgraded additional which for deployed upgrades Aramco, more quarter, XX confidence we rig with shape completed third initial we our four three in for six last from plan

First, operating by drilling SANAD rigs the signed new Nabors four-year been in rigs contracts managed SANAD. and under Kingdom These on with XX Aramco. have

to will Nabors operate and SANAD forward, them. lease SANAD, Going these will to rigs continue

from contributed SANAD awarded contract, Aramco rig been quarter. will a has and Another also was four-year recently just which this commence to

Second, been JV. with contribution have as subsequently awarded to additional previously the rigs four-year five the has agreed, contracts. Nabors rigs also These rig contributed an cash. Aramco matched

the at to beginning Third, the flow increase rollover considerable lead free the to these will in contracts first cash of in new of rates XXXX. SANAD day quarter

by additional quarter's units detail XX increased Nabors rigs from Globally, clients see rigs. in interest growing results. rig increase to let in activity to primarily seasonal for we International. Now, due the the worldwide high-spec me and Canada continued

quarter, deployed three upgrade conversions contracts XX, work XXXXs. to five the for for and we third Lower rigs and additional During Kazakhstan, signed Colombia, the Argentina. Russia, in we rigs In PACE-B signed of

year. completes this converted rigs out our six to go Another B program rig upgrade This B this quarter. will

With hand, few the we contracts workover should We next in also in Argentina. rigs an sale in U.S. activity see the increase activity aside in the of signed International over in see the should we increases the have quarters from

Beyond those, markets. across discussions there are multiple for more

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

Drilling XX, in Adjusted the coupled million with improvement, experienced U.S. was increase Lower U.S. $XX.X the fractional by count. on which for rig focus The margin of strong increased let's segment. segment EBITDA XX%. a by driven First, the increase

was second a improvement Third quarter. quarter the $X,XXX, in over Lower $X,XXX XX the daily margin

rigs spot day, term reflects over continued increases from per plus at Just in day while increased The improved rates, resulted revenue reductions came rates. the remainder cost and $XXX day improvement performance. move higher per from recontracting revenue

rigs. working We This of includes the compares quarter XXX for have upgrades XX we X to above and capabilities AC upgrades. West upgrade SCR super-spec those scheduled top work total next were work make we In brings and have in vital rig at fourth the Texas total industry. tier commence range. call, I end. and The at XXX to by the of the XXXX. for year. contracts of average mid-$XX,XXX of destined rigs last total the all middle XX. four these to Texas earnings recent a XX quarter awards X,XXX-horsepower day XXX these Since last first super-spec into rigs' awarded to legacy quarter. of work most These the rates are to currently in summary, signed current The the awarded are return seven MXXXs multi-year an of deployments Together work rigs rigs Our with to third quarter, Lower Three were for four in comfortably South design three of quarter performance with XX the through (XX:XX:XX), mentioned four MXXXs. super-spec upgrade the the

these remain rigs addition up PACE-F rigs and the as these to In at to highest capital a PACE-M intend AC to upgrade cost and rigs candidates idle have targets within XX of based are best approximately We balance use approximately which upgrade, contracts. six to rigs. CapEx are in only the and U.S. $X million. our X,XXX-horsepower customer rigs each mentioned, on These XXXX-horsepower conversions our we the include These

increase XX XX as rigs. customer add many end. up rig add it customers. and operators comes XX as stretched to quarterly of of rig each our operator. the the quarter, as larger add our third About quarter through we Last count. A XX% XX We views. Since is year. end our one pass rigs; rigs. by the we one I Since customers which duration. of clients of think driven rig survey useful to XX rigs XX directly plan These information survey approximately to Lower Next, year. our count quarter, share this conduct to would drop plan operators the approximately their XX term is count XX% XX% survey the contract industry-wide the beyond to deliberately by of along We Lower is significant the XX From end fleet from expect was indicated last quarter, of XX% represent represents portion on rigs year land the of of Lower the contracted then, these At survey, Lower to XX this the would results ends. will the have

mean continue. plans we for this in margins We for expand and are even durations all formulate to does expect Our further, the are their more will XXXX. customers poised trend with toward to of longer discussions What Nabors? for begin rigs contract they as

For the exit rigs and fourth approximately XXX average quarter the we expect quarter, Lower the to working XX XXX. at in

more Our to fleet business XX to come. power. think its starting upgraded is for several ongoing leading rigs. to The edge is additional and there are operators the Discussions below continues still average with earnings Lower pricing super-spec We strengthen. show is

setting XXXX, and improve previously XX good rate to our Lower for a us exit margin to our guided expect up We to XXXX. $X,XXX exceed for continue

was count segment. of increased turn Net International sale of from and Arabia in to resulted jackups. to by cost the the This let's by rigs $X,XXX markets. margin rig increases sale three from in This Saudi from increase the three net average XX rigs Now, loss Drilling average of the decline approximately primarily The day. the per of declined jackups certain the XX.

no several next in significant third versus continuously quarter rigs a we The was deployed rigs partially Russia, on an impact JV Saudi well delayed rig and expected. of second increases of pre-revenue EBITDA. to rigs we sale contribution. part year delays in higher-margin platform in during our early are quarters, the increase five Russia. as additional commencement expectations. Colombia, two a also rigs also offshore reactivation terms deliver in to put of originally jackups. increase to The late as amounts Arabia, had segment's margins somewhat the next quarter operational They the to to and previously been That Some split of These have operator impact to to agreement, the Colombia under is and as quarter expected while of start negative now was expect of in in Kazakhstan. primarily relate In The of rig back ongoing its costs. In XXXX. absorbed rigs timing offset on by Mexico the placed rigs have operations margins well International of work these count to our our due drag two as partner with Mexico, have start-up other as was has the these the the due One the fourth-quarter of and in current Argentina, expectations. be the as scheduled on

contribution is fourth from of with as deferred material the delayed Mexico in and reactivation margin reflects upfront decline likely the additional Our International also reduction further recognition reflects costs Saudi. a decline This margin gross in The of the payments in markets. contracts the quarter. rigs a to expire multiple in various result delays daily decline as quarter, primarily in the

Aside rig from earnings contracts maintained to additional with we XXXX. this visibility impact,

mentioned, negotiated first previously As in considerable newly increased quarter flow XXXX. the will provide of the free rollover starting cash contracts

Now, to segment. Canadian Drilling let's the turn

a improvement count The third in seasonal quarter the reflects normally in rig Canada.

count Lower stands at spec the mix. in rigs. in rig XX. quarter count sequentially fourth due increased rig doubles as tend At increased Margins over the declined Our quarter, utilization fleet this our the to XX there see increases. from point count to XX just to rig

XX improve for to expect margin optimum structure. as to our XX more utilization a should year overhead quarter, fourth rigs in up We the versus direct approach the ago. than fourth And quarter XX% we our average daily

up impact second was quarter placement in kicked quarter's EBITDA the International in growth discuss Tubular activity on will million expected of Services marked results. Profitability Solutions. quarter the results. I slightly. especially late the quarter $X.X showed only in the in markets. The improvement, third Now, $XX.X this limited Drilling was above wellbore Adjusted Revenue with million, in and

Although our our running have and Performance Software improved lagged. services results significantly, placement have Tubular wellbore

Saudi in quarter we have resulted from In fourth penetration, we in directional This Casing Solutions. Lower year. said, or synergies revenue are running acquisition. are increased our significant for increase Drilling increased per this reduction job. have approximately costs we activity penetration in the Nabors so challenges and strengthen XX, support significantly since As a currently in with we've are the ability levels. and quarter faced of to continue a to created increased we initial market job being some plans Internationally, another begin but to wellbore placement in activity the expect our at our Tesco That increased the the activity should we scheduled our has Arabia. continued during behind capture highest

International tubular saw also services the markets. We NDS the quarter in We remain potential strong for in in our business the in growth portfolio confident Saudi. the third entire growth in

$XX million exceed growth. million. fourth expect XXX% We performance in quarter This That will $XX EBITDA be would XX% of growth likely our target, which the to over short adjusted of was to equate year-over-year.

gap quarters. We close in to that expect coming

turn third-party revenue despite aftermarket let's positive, high in The to improved remain deliveries revenue. Results Finally, mix and margin decline Rig the Technologies. in sales. favor of

cost our the as even addition, to Adjusted growth, breakeven. capture just bottom-line including flat line In initiatives of contracted. enabled structure, EBITDA was improve approximately the the synergies, Tesco at top above

increase For revenue. and and rental the deliveries in fourth equipment stronger quarter, expect we service an external customers to

International Before absorb International I occurring up call believe I would markets comment. one improvement turn effects overall the our confronts downturn. capacity. even results are William, the available lingering rig the business to The make like beginning as over sequential the is the to more to of in and We gearing

position in high-potential International Our the is strong. markets

in position results throughout Then in comments. business our William more outlook. expect we the portfolio. to we quarter's That potential be a will review earnings results additional the should to financial and accelerate concludes thoughts provide As pricing now the my on XXXX. realize fully firms,

William J. Restrepo

a net million, or in The per our notes Nabors $X.XX. quarter from share morning. per from share of a $XX included the the loss Results continuing after Good of $X.XX represented operations reduction $XXX loss of loss million X.XX tax. attributable of to

results quarter or compared in the second $XXX loss The $X.XX third share, to of a quarter. million, per

flat a quarter to was for with by related count rig Drilling $XXX $XXX results after of the day line higher operations at to a the second loss decrease Revenue fractional $XX.X rigs in $XX in increases increased lower returned internal well margin. XX% in smaller Rig as result significantly The to than despite decreased the $X.XX in was similar The declined U.S. the million, per our as quarter million in included lower added by a from in or June. jackup and were quarter for in equipment X% work. of upset in tax. a U.S. intercompany revenue due to the revenue share replacements rigs million, higher though, to shipment revenue third a sequentially count revenue by in In $XX sales. components. mix the essentially Lower Lower Lower assets increase to XX increase by the rig the the rig Canada, revenue X% seasonal million. new Technologies Technologies by at the per count. of in the reflecting The rigs Rig per in in by increase jackups somewhat reflected of and our rigs, three average XX to sequentially. Solutions Alaska. working improvement decline rig lower recovery revenue million. absence $XXX XX% that rates $XX external out count. revenue of higher rig mainly sales increased XX. up Drilling rigs would the day, We was second day revenue million Software quarter. their driven mainly which point increased XX% sold International the segment Canada, Rig quarter the The $X,XXX was decrease XXX a divested XX driven by prior Lower in market rebound Revenue seasonal XX% of to reflecting X% Performance X% was compared Drilling and working increased the million, in was somewhat by upset to the equipment the Average generated sale

basis-point equipment. more the of results the sixth Adjusted to bottom consecutive The EBITDA of million by XXXX, the XX.X%, quarter. driven margins. improvement XX million, grew compared Drilling to as from significant EBITDA cyclical second Lower in the margin quarter increased EBITDA margins improvement quarter. adjusted second a in million first $XX than $XXX $XX delayed over second significantly. quarter EBITDA the the Lower by increased benefited quarter shipments $XXX in has to Tesco by for rose U.S. doubled. EBITDA XX XXX increased Since daily million

for margins basis-point an were $X,XXX. for Our a more set for per quarter, improvement. to as the Lower XXX than $X,XXX we four XX up mark Daily from minimum day Last the the margin XX quarter quarter. improved XX.X%, target to $X,XXX the Lower EBITDA

day day expected, spending sequentially, average rate and the our than repair also our a While contracted $XXX decrease daily in maintenance fleet by $XXX we per expenses. operating as increased more contributed for

margin daily in would though fall fourth and a to improvement higher expect as progress reprice same margins quarter day. current coming we to rigs to continue increase $X,XXX the not pricing to sequential expect the levels. have we the quarters, We additional to reported the within of range We per $X,XXX to opportunity for third multiple quarter, the anticipate at in market for we

rigs reflects XX adjusted as fourth International and Mexico. in Our rig sold This the increase absence U.S. an decline add should expenses should $X for declined them. jackups were Lower to XXX the of well between which Alaska and by in count Saudi offshore the higher rig quarter. $XXX market the third quarter. approximately to in million million EBITDA mid-June Arabia Saudi the in as incremental

day in in Saudi our our $XX,XXX impacted cost active number resulted rigs significant revenue operations. by quarterly partially in Argentina. increase the the the smaller, In of sale count, rigs. brought jackups, driven which of divested replaced compared in than incremental for the markets back by addition start-up to were offsetting margin The rigs as and addition, rig rigs prior We Colombia, jackup three-rig Russia also quarter, overall before of quarter, a of divestiture. six the the $XX,XXX which were our margins. Higher International per Argentina in the accounted more lower were costs in workover recently higher

rigs. margins $X offsetting for we quarter mid adjusted partially work of the Our quarter. $X,XXX has the Consequently, low high-margin first the daily in of additional in of expect from quarter EBITDA $X for Mexico fourth of the rigs, delayed to in sale count quarter benefit million until two rigs the workover million from second been fourth the range. the rig two increased Deployment drilling platform XXXX. Canada seasonal the should

rig daily per day. While almost is margin in count $X,XXX XX.X quarter, to rigs by decline the expected to X increased

picked up seasonally, activity less As smaller, rigs. we capable reactivate

more We expect quarter. to add three the during rigs to four fourth

to quarter. posted improve of in Drilling million, per adjusted second from million day. $XX.X should the EBITDA margins up Solutions by However, $XXX $XX.X $XXX

We categories. expect quarter the fourth the an other well in results placement as improvement in increase in wellbore as service

quarter, of EBITDA two Technology this XXXX. third adjusted breakeven We the technology approximately rig quarter quarter are just a as and representing expect significant with Canrig segment, equipment as The sales higher above million external fourth flat for to the for revenue. efforts, EBITDA than $XX fourth second. well In service and in of rental adjusted targeting development more the increase the Rig mid-single-digits. of segment should increase reported EBITDA we in

me our let Now, liquidity and review generation. cash

a in the quarter, facilities including $X.XX an to The July provide expiring in with credit enhanced During facility restructured our billion facility guarantees $XXX includes for additional subsidiary XXXX, October new protection and million covenant. our our from facility XXXX. we and us with in original lenders, credit five-year expiring

unchanged rigs with debt, net and is July. SANAD part quarter in million net from on payments the for were semiannual included debt October expected into on before Our Nabors original XXXX Nabors The by on between notes, from in $XXX essentially Nabors end one the the and premium increase arrived debt Aramco to from in quarter payments five The except cash third from payment Aramco Xth. facility and resulted only the $XXX redeemed quarter. which reduced for million of Aramco. The amount. contribution increased offsetting the the in Net interest

employee some a due payables. we than working our in reduction capital This mainly more a $XX in mainly payables. to addition, reduction was In consumed million anticipated in

and additional third to SANAD. cycle nonrecurring million to $XX for The an related an to had our of early Nabors payroll extra approximately equivalent million in service end benefits of employees employee transfer payments quarter $XX accrued

$XXX flow. fourth in payments are to outflows cash CapEx for quarterly quarter flow million. a rate the as cash Aramco operational our quarter totaled We contained, cash expect interest our increases, payment third the in negligible, debt reduction the from strong remain CapEx and net adds

We CapEx million. actual XXXX. in which The in quarter slipping is neighborhood million CapEx are expected $XXX into translates of late approximately expenditures for the targeting this fourth XXXX quarter with of $XXX the majority into of payments

from targeting to the end net the turn the in of that, the year For Tony With are I issues the will of equity debt XXXX, back concluding XXXX, remarks. call May. in with full we line for excluding his proceeds

Anthony G. Petrello

with the about Thank Today, of Drilling forward outlook. them conclude to of a you, unique my positive Nabors and position following: year the the all our businesses. a our shows the are record is morning In William. leading to will track our signs I path remarks strength momentum. What's business, in of increase portfolio U.S. this this clear

Lower contract super-spec awards, our fleet none. As to demonstrated is by recent XX second

validates Our customers' and our rigs these strategy uptake execution. of

business Our generally. team up tremendous and signs are delivering the solid put results has super-spec entire additional to customers. value fleet of are There offshore XXXX. The improvement in

We our services, deployment to In services comments XX unique turn in shrinking. for for ongoing. drilling capacity our in rig of signed is companies, up The reception excess additional from a see rigs niche customer well-positioned Consistent path we positive. expand There discussions are many pricing service to with are we here. XXXX. is from Internationally, business XXXX. in larger this have

pipeline a additional have robust We market. of content to

you Technologies. that, quarter our continue remarks We capital We rising count benefit free attention. drives in two new Thank as towards largest morning. With take mainly International steady returns and my increases quarter segment and your ultimately strides U.S. segments The concludes beyond, inquiries cash full will without rig and increasing each these equipment That volume see from this activity fourth the as and in Rig activity, questions. Rig we flow from a worldwide continue in well. the In of improvement of your should our increasing this and segments, improving growth we contribution for International and fulfillment. time sum, goal to markets. make improve on drives of segment. The drives aftermarket Technology to long-term in the higher activity for

Operator

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

The from first with Raymond Adkins question James. comes Marshall

J. Marshall Adkins

International, Good first a I It going probably tell cylinders So, What's on rigs what; morning, XX to up upgrade the right. I see guys. is there's those? to on a side. XXXX, I'm other longer decade hone – I'll the cost firing everything aren't. International a full running good don't Talk a outlook quarter, to got to quarter of more terms those be got but these outlook your tend lot about lot I few since if that you going going XXXX, outlook, XXX this only Siggi, going, there's the noise you've got, in for Siggi's next know getting how customers in in is International. things just really for know and that out there, to I Is with that moving pricing, the lot together rigs? I'm then a full-year conversations a of it's lead-time know into about think time are generic curious I year? XX – bit business. a But you here. looking but for all in and another there, you to a not the finally, little remember of going. but

Anthony G. Petrello

to actually Siggi, for the talk contracts XX-rig stage are rigs hand we're there through where today, for Siggi discussions. let To signed the to more Marshall have XX; robust XX. quarters just markets rigs; so XX during count at are. color some about set XX now, add in next and deploy hand I'll September it, clear, what's it's and the in a That's not right we

Siegfried Meissner

rigs And high-spec then even first. that So, you rigs those into with new builds low Marshall, where I CapEx (XX:XX:XX) in – pressure work have that markets there to those we there's obviously Argentina, those ones interest expect you for areas markets. in But (XX:XX:XX) relative need strong so the pricing we rigs we for other idle is see (XX:XX:XX), example, will go rigs. move like and go and rigs, a initially,

to going. more strong there's rigs think see a lot potential a I So,

J. Marshall Adkins

Is going of pretty we or costs? that that mob kind it high think be Should about is...? way

Siegfried Meissner

we get obviously, way but cost that deals. we recovered the way And, CapEx going, cost. the those it, yeah, mob and I mean there's the we've been also negotiating CapEx mob are in

J. Marshall Adkins

cash one the all your Tony. pay-down Is demand's it accelerate And going Terrific. you as there, to meaningful do you if last you generating you, flow, CapEx? into with go free you just do debt What particularly I've got are or for XXXX. it?

Anthony G. Petrello

(XX:XX:XX) about think debt now, company not I grow. right because Marshall down. interested continuing thinking And to the not around pay- in I'm

to we're think we're I see, to can our asset and right be we our But base you as cetera. have et asset now excited about improving base, really measured what approaching.

install I so, And down want our and pay advantage I getting debt to take the assets base to be work. want to worlds. continue to get of best both yet more of and poised to

how We days do That's somebody pneumonia, XX we and So our did past extra our company. now. if what I Pay trading. debt our hurt cold, right debt's on debt. look that you banks which banks, past gets couple treated job We just and with that's investment have sometimes think at is leverage what And I a the an balance. get debt. the a hours. But does the down right now, happened grade the look bias look down pay continues the markets when to the with almost at mantra the raised shown like we be think is the fantastic. William did basically think But were

things. get And we assets debt a learned for these through to the and debt them be think – partner now, that. down. the our to it to of what I want in paid customers right getting of And all some reasons those show preserve I our deploying is So, value proposition

helping is automation play will kind to rig change those bellwether; out asking to for that think we But major concept. the of a that again, rigs One want the for in. the other a for unmanned things is our of East operator things want interesting thing landscape. I that's basically is rig; participate Middle operator coming will state-of-the-art, internationally would participate And of there we with in tender see that happening a be to kind manless floor But it's us right now. the

pay-down So, said, debt think all that I priority. is the

J. Marshall Adkins

Great. guys. Thanks,

Operator

Wicklund from hands. Okay. Suisse have comes in ahead. your next James Internationally, before Wicklund And go have business. you rigs LLC change The and Suisse. we've wondering guys Credit a Saudi? just Weatherford Good question Please to seen internationally be all - long work. will what's Deutag question And put rigs over with in bigger how the we time? KCA with James back scale obviously consolidation to and seen matters company? morning, Credit growth your I'm Securities you And guys. be matter scale on international or of with the really is just you Does on upgraded going internationally satisfied potential it Does markets, for organic is, this sense make (USA)

Anthony G. Petrello

you've I on think a core point. Well, hit

one even if negatives it's you've single string a about people XX other ever international That's years, I been international and think parlayed operations, does think scale forma. goes single the good operation, your in as pro the our of country nothing as truism that I string business. start for you the that and have in operations do matter, whether where us in historically, they it's

effect. then And one country that and mishaps usually on have a have it negative your the things get a right time. a to is all rigs and you the first you plans, cost And pro fixed, only two happen disproportionate when therefore, side. have the have these You your forma, hard are in or it's revenue

that does scale. So, the for focus matter. try And why, we have potential that's scale markets on to Jim,

on It a those Colombia, at drilling revenue for at And look including the needs Kazakhstan most its effect difference your Saudi, a make we're that companies, of potential places look that. a why these And markets the – company. of service If that's because days, Kuwait, every those in difference. does There's spending reason you our of in when you Oman, think where parts own overhead for also higher. country we makes all small international overhead scale. Argentina, Russia, – are companies big numbers marketplace, time

growing yes, the consolidation (XX:XX:XX) that would all so one to of and that. ways And do be

to to at go the that every through gone What of out marketplace terms that's international through the we've quality also assume change flight that a kind marketplace about view same has rigs. looked could of have deal the we a is higher U.S. is in You there.

when out of have things. there, aware of be rigs evaluate so, you you And a two bunch to

to and - move to schedule rigs, of Credit Suisse got they up, SCR be are are with yeah. aware Continue two, You've to Wicklund which the you've compliant of at the the LLC (USA) various so-called components look those of got how special... number what Gs James Securities have NOCs,

Anthony G. Petrello

under are even are today in compliance. many rigs And when Yeah. operating not contracts, people

be could do a million million there's a hit compliance we – it just when those So, G stuff. a $X like getting deal, schedule $X

stuff frankly, bit about good accretive of impossible, Wicklund Suisse more we all Securities to be we CapEx And us. the a put I'm just into hidden the (USA) a has saying realistic I've were for contingencies will be So, deals. industry. was be and taken - a things if a fit yes, it Nabors' James still CapEx, the But makes for it. I we shareholders, does win-win it's it'd were little but it really industry International to the to remember Credit fell contingency But be LLC need deals that operations on described, low. to internationally. account, there's on of think a deal – everybody bit had the we and these And not the and there into it that think

Anthony G. Petrello

upgrade. Yeah. follow-up the James of can say best Credit that (USA) this markets, LLC got the you Wicklund My And on rigs use XX Suisse - if I you've capital. Securities domestic you could that your is

XXX-and-teens not XXX, years QX. to new that not while you capacity we that possible? the rigs going economically to we if mid-XXs? are for the build with working market rigs you've the can above market return to that'll rates got build you any even rigs can going day incremental four upgrade? How got or I many we mean, in that this years You've rigs upgrade highest the ones that's XX can a in – though add low of three Are Are about be

Anthony G. Petrello

head. on think I nail the hit you've the

from these in XX the has interesting a on a top you If about NOV, to – certainly upgraded up existing that's you operator that, have compared that indicated of for an to his pretty good our $X position we've we to some can before, he But think special rigs, price. thing today, will million. – new I be that including fleet, rig. be quote to would people number wants that added what as

So... James Wicklund - Credit Suisse Securities (USA) LLC No kidding?

Anthony G. Petrello

we think course, in the five big capacity. is our it That, competitors have do some the there's best capital. use of also of And, of

that to reach hard it's out building. to people new believe will So,

talk have some as At million. SCR $XX competitors million, some – I if that is those $XX point, million the make I'd upgrade upgrade of legacy point use candidates. about $XX actually for also become rigs. can other I Well, cost, Jim, costs an of The

mean, answer the I because a in in LLC (USA) stuff. terms you of have unique capability cost, - Securities yeah. do (XX:XX:XX). internal And actually we there's because do Suisse James little So, Wicklund this it bit – your can to it Yeah, we're and Credit

Anthony G. Petrello

Yeah.

XX ability terms – where execute, money so the to economic, to capacity have contracts put many mean, top firm point actually months one that roll them of and we was the – make given in their building out, month. their to would but top those Canrig mouth And operator to they're point in XX demand drives other maybe drives, at I our I that XX there's is actually XX a is, willing if and rigs. say,

with to the spillover have everybody obviously on yet. that plans and – answers. scale our Okay. of that. very lot Suisse not from with building be Securities their for that's of hasn't That for customer LLC would good Thank we're business, have trying a Canrig for you. some seeing we good. answer. to customers like process. kind forthcoming it, customers be do frankly, with customers now but And we initiate little need do okay, be discussion and more large – So, of it's we alignment can't part to the which Gentlemen, yet Thanks of Credit - this part good tremendous questions Good the a benefited and Wicklund (USA) James

Anthony G. Petrello

Thank you.

Operator

question James go from comes The Okay. ahead. Evercore ISI. West with Please next

James West

guys. Hey, good morning

Anthony G. Petrello

morning. Good

William J. Restrepo

Good morning.

James West

perhaps stronger and this becoming sure there kind get that you're conversations with know maybe in a phenomenon, and even this Tony you somewhat customer quarterly be your make or this than and more months ramp, you the your see rigs? building coming having that they it's ramp then of expected, of and base XX they Nabors upgraded to that seems Lower concerned urgency sense is in grab in now line and a of on continued William, that XXXX, as that quicker there need rig, is can ago? a they for competitors', Are supply dwindling and six that's than out to I

Anthony G. Petrello

said accelerating seems I recall yes. conference There in bias and had excess for occurring. see a problem, capacity they And holding that transfer rig. of we worked one onto the that Permian – the rig was didn't mentioned last you really be they or only customers, I it. to answer area retain the to a said were surveyed to issues view our that another think, if could call thematically, we they an rig to going mentioned there when any terms Permian, customers even to this so and be the super-spec to big our had and – super-spec and when on of we you I that when that back I in would they downside it actually that us two

Edgar, bias. that him that kind talk recently, let idea the bit dealt you Lower XX, some more because give he's with sense a But that of of think now Edgar? I some urgency. indication let who about runs of our an little and was customers So, I'll

James West

great. Okay,

Edgar Rincon

conversations. and we Yes, that how of getting it's we contract we're in context utilization, of type have been more almost that for have in sign are been able XXX% Tier talking the recently. is and and customers announce engaging more They of recently, And to our the to X. these type

want So yes, to the secure rigs. they

recently. the With up the up are securing they the and capital the been front, we have to the and willingness that to term of we have announced so offering the sufficient front, the have been is far, we so rig, on investment. – can strategy following capital that but be with the payback needs have minimum purpose they some That it's that successful now rigs guarantee put the we not

James West

great. okay, Okay,

Anthony G. Petrello

super get for big healthy the And And well with to the everybody you he really at good I but cheapest don't of really because think rigs the process. the to – a the companies, the speaks about to drilling, really this as a stuff, the lowest, also you these in have notion standardize consolidation in of get the I this getting standard all economics think you that rig available but talks mindset And five. a good those sign manufacturing I for before curve And versions different that. look and need of need mean, customer manufacturing drilling same it's lend having terms and of there does and capabilities. doesn't to it's for just of

SmartRig, I be thing good. and course the which super-spec something which terms in customers. we'll beyond capabilities, of of point on providing that's our very not next view, with focusing leg think is it's From of up tap we we're hope another to

James West

Right.

Edgar Rincon

characteristics they believe the And actually be to rigs, like competitive. all a when these be I They also They're would of market. fast they're moving. going I extremely upgraded, add success in SmartRig. that are to they have are great going the the

conversation I So, to going MXXX the new the significant new (XX:XX:XX) market. builds, on this to about see a don't a in back benefit

is So, show of will on on preferred, been side our that be my capital view new has disclosed to be will will into And before need and are MXXX that market. we're the will the brought they operators that commitment, deals is our that with able it make less make of than obtain what investment, competitors the payback to because MXXXs. unless not make side sense type the the for to

James West

Okay.

now for done venture the color. And William first financial maybe moves we've is on couple the here venture. and with moves Aramco, into that great. cash That's that just put – then great Okay, SANAD of

it now build you this are at now rig self-sustaining that you As cash. – out point? fleet, (XX:XX:XX) build is

William J. Restrepo

Well, actually now in cash too we right SANAD much this way have at point.

that the are mechanism excess SANAD be out, discussions towards to this now for flushing fact needs more that than the to funded. and discussing we're the cash So,

builds to rigs, but managed up. given head-start ready projections, a coming I yet in of to that coming I clear years. given to required again, be NOB the to our I be (XX:XX:XX) It's won't the will when believe cash, Nabors able not fund enough Now, financing delivering we've start or think new to SANAD those start think, be in

James West

All right, know. to great Okay, thanks, guys.

Operator

Okay. Mulvehill The comes Merrill of Chase ahead. next America from with go Lynch. Bank question Please

Chase Mulvehill

question, medium because to the of no – could kind of door guess first of Hey, asset debt on what's the to the if liquidity. just But good view accelerate no sales? in sales morning. view term, cash on plenty there's over got your further further pay you've bring reason I kind the potential realizing liquidity I get down, asset

Anthony G. Petrello

looking Yeah. to for monetize. excess equipment excess We're to constantly the antiquated excess company inventory, yards,

millions to ongoing that's just a and day-to-day that. do thing. an But and that needle But get nothing it's hopper, helpful but so, There's for it's course in it all right tens moving, up just focused And continue of year. the process. yes, very we probably, get the to of on everybody of

Chase Mulvehill

notes think over near or that, the do refinancing maybe term the And term? medium relates as and you maybe XXXX about to it XXXX how Okay. then

Anthony G. Petrello

William?

William J. Restrepo

I'll that. answer – We

think this is – William. I

system think the in time so at do refinancing. our market basically the think I have Nabors rush has to four add to for we done is that into don't – last the that years capacity or when so the I to that wrong sufficient

think of forward. of in in going not have how our up spots think refinancings the think terms that to I I And I to market. it been of now, finding all a model change right the will do

but, I refinancing, the wrong think some rush into do we're next we to the market the for going look time. not to at will quarters over opportunities again,

Chase Mulvehill

for one should many upgrades squeeze Lower we right. to XX Potential be the how model? XXXX, I'm easy. real All one quick going into plugging for Okay. in,

Anthony G. Petrello

and this XXX that pipeline we count have So, right said rig fact, in the as now, today, got three signed, we we in signed have, morning, are signed. three I more before,

we next of third that's... – year. total XX now a out, XX. rolling XX September have through So, the And through of

Chase Mulvehill

Okay.

Anthony G. Petrello

That's we are And, even now. right there up for more. discussions said, as locked ongoing

Chase Mulvehill

Sorry, time? ahead. lead What's the go

Anthony G. Petrello

then quarter, quarter the there's year, – in next – or start fourth of a They six couple in that, that first in second the year. about after and quarter next second the then five the and start

Chase Mulvehill

signed how if out quickly a market? you that the contract into And could today, you put

Anthony G. Petrello

months. Maximum five

Chase Mulvehill

Okay.

Anthony G. Petrello

in have we because we'd that actually accelerate it long the once items notice, actually some once And and do machine's up even we the even easier, we can lead running inventory. if some get

Chase Mulvehill

Got Thanks, Thanks, William. Tony. Okay. it.

Anthony G. Petrello

you. Thank

Dennis A. Smith

closing call, we're then please. one we'll Phil, just long in hour more the question on and wind an up let's here, take

Operator

Okay. The next question comes from with go ahead. Marc Bianchi Please Cowen.

Marc Bianchi

Thank quarter I the catch you. repeat fourth didn't please? Maybe quite International count, guidance just just quick, for that. rig that, real Could you

Anthony G. Petrello

was it? – what The

William J. Restrepo

to for the want expect, that, I think mean, Do cover you we XX fourth – Tony? rigs I yeah, quarter.

Marc Bianchi

Okay.

Okay. you Thank for that.

William J. Restrepo

That closed. includes a a that's have divestiture we as deal fact, we – in already sold, are

constraints, as our our our was very, of Our workover Argentina, business. operations very you in know, a slim rigs some and which, long-awaited given cash-flow-generating well of sale

and the in quarter, XX in we that rigs which will But be So, expect third not to About half average there including rigs in gone. that, fourth the six the fourth. have a is quarter. business

Marc Bianchi

Okay.

Anthony G. Petrello

actually It's the quarter. in four fourth it's incremental – net rigs

Siegfried Meissner

Because we're rigs. adding two

Anthony G. Petrello

increase to is that rigs. net and rigs actually of rigs Because actually are opposed rigs, we're that as some contributing adding noncontributing

So, the mix, the in portfolio other dramatically. words, actually the of improves mix

Marc Bianchi

Okay. Siggi mentioned some pricing weakness.

more. bit reason that probably you expand on there the little think if meant being pricing mix but for I could just you a

William J. Restrepo

pressure, pricing There's Marc.

Marc Bianchi

There is pricing pressure?

William J. Restrepo

pressure. pricing There is

Marc Bianchi

Okay.

William J. Restrepo

all the markets, that is in means yeah, So recovery, as mentioned. first not Tony uniform of that right, all,

tight and are no competitive In pricing pressure some more than others. more markets we other So, whatsoever. see markets

additional contracts our last, at six, been the we've seven rigs over in the lower past. could or months say, part I would get have we awarded been that that but we've added – So of prices

mentioned with day there's issue, soft excess rates same we So, rid pricing the get mix expect XXXX seeing there's in happen to we rates back a markets have the in And current don't also XXXX. means in there environment certain still have that we in of that momentum. get that Tony we we that but of some still yes, had the softness in to start kind of we before amount

Marc Bianchi

and bit I the should and international you little guys it's a to margin but where unpredictable, know say, care Do when maybe bottom?

William J. Restrepo

expect right some answer team. And Siggi next given what I And tests apply have it next sometimes. which to should expectations of to a But year depends now, giving the done And working my spend I'll is think He And the phenomenal that. market where operational has we and faith, on in on better mix. but information, all our year. doing lot decide on the are that So, be a are than that job driver sometimes they've general given I we we faith a Meissner. this say And us have taking give budget premature the going and for be year. in he's, it what I can you right be now our that we will year. would to margins we dollars next of

process, expect So, do we're higher cut. And and as that until much going But this to to expect at say, to see have margin decisions be what EBITDA budget And we gets point, number. to gets able a an take on you we we'll more what process and and do, in to to this how better is well. we that a a XXXX. cost, his and added XXXX we'll give see like what versus we'd where some and be then is come interactive Siggi team this it is us will

Marc Bianchi

transitioning more. there with us cash Okay. first higher just cash you could on flow a And – should basis? quarter, just Saudi are help what be if a hitting to and that's the could The day rigs in I per one uplift which flow

Anthony G. Petrello

I'll lot It's all That's money. a of you. tell

Marc Bianchi

Okay.

Anthony G. Petrello

year-to-year and at in of lot be line I up so it's margins, effects when in that and way these us – all the lot starting flow okay? international gauging cash is International. the trying gives free free be increases year-to-year full other in while of the the flow's a first force you're going saying bottom words, It's you're that's I'm confidence of hearing in would rate comes money, to look cash a – a of the So up, money lot in that just quarter. And going with it

Marc Bianchi

Thanks great. much. Okay, very

Operator

Okay, this concludes like would turn session. closing our question-and-answer the remarks. Denny I Smith over to any for back conference to

Dennis A. Smith

to, free or you, for email always, you joining Thank get call we had be a and again. gentlemen, available. as Thanks today. didn't us And to feel ladies us if us, and we'll question

Operator

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

disconnect. now may You

Nabors Industries (NBR) 31 Oct 182018 Q3 Earnings call transcript