Nabors Announces Fourth Quarter 2023 Results

HAMILTON, Bermuda, Feb. 6, 2024 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors" or the "Company") (NYSE:NBR) today reported fourth quarter 2023 operating revenues of $726 million, compared to operating revenues of $734 million in the third quarter. The net loss attributable to Nabors shareholders for the quarter was $17 million, compared to a net loss of $49 million in the third quarter. This equates to a loss of $2.70 per diluted share, compared to a loss per diluted share of $6.26 in the third quarter. The fourth quarter results included a gain, related to mark-to-market treatment of Nabors warrants, of $10 million, or $1.14 per diluted share, compared to a charge of $8 million, or $0.86 per diluted share, in the third quarter. Fourth quarter adjusted EBITDA was $230 million, compared to $210 million in the previous quarter.

Full-year 2023 operating revenues were $3.0 billion, compared to $2.7 billion in the prior year. This 13% overall increase was driven by growth in all company segments. Nabors Drilling Solutions and Rig Technologies both expanded by 24%. U.S. Drilling revenue increased by 10%, while International Drilling was 12% higher than in 2022.

For the full year 2023, the net loss attributable to Nabors shareholders was $11.8 million, compared to a loss of $350.3 million in 2022. Adjusted operating income improved to $269.9 million from $44.3 million. Adjusted EBITDA for 2023 was $915 million, compared to $709 million in the prior year, which translates into 29% year-on-year growth.

Anthony G. Petrello, Nabors Chairman, CEO and President, commented, "Our fourth quarter operating results exceeded our expectations across all of our segments. In the U.S., daily rig margins in the Lower 48 increased sequentially, as daily revenue expanded and daily expenses were lower. Similarly, daily margins in our International business widened.

"Pricing in the Lower 48 market held firm, as utilization of the highest specification rigs remained high. Average rig count was slightly below our estimates, as several rigs started later in the quarter than anticipated. In our International segment, rig count increased as deployments in Saudi Arabia and Colombia contributed. The International daily margin expanded, driven by better overall operating performance, and specifically by the newbuild deployments in Saudi Arabia. The improvement in our Drilling Solutions segment largely reflected growth from the third party and international markets. Rig Technologies benefitted from higher volumes in both capital equipment and the aftermarket."

Highlights

• Nabors Drilling Solutions was selected by a major operator in the Middle East to deploy NDS's rig automation technology. Initially, the award covers five working rigs, with the potential for significant expansion.
• ExxonMobil has selected Nabors to support its lithium production project in Arkansas. Nabors has commenced operations on this project with one of its high-specification PACE®-X rigs.
• One of the largest Lower 48 operators named a Nabors PACE®-X rig its Rig of the Year, for the second consecutive year, based on its performance against rigs from six other drilling contractors. This award recognizes the Nabors crew and rig technology for their accomplishments.
• Nabors was selected to provide technical and operational support to a local drilling contractor in Libya, under a Technical Services Agreement. Earlier in the year, this same contractor purchased two rigs from Nabors, which are now being deployed in Libya.
• Nabors and SLB (NYSE:SLB) jointly announced a collaboration to scale automated drilling solutions for operators and drilling contractors. This integration of both companies' platforms expands the breadth of drilling automation technologies available to customers, and increases their flexibility to utilize existing rig control systems from either Nabors or SLB. The announcement follows technology agreements earlier in 2023 with Corva and with Halliburton (NYSE:HAL).
• Nabors Energy Transition Corporation, the special purpose acquisition company sponsored by Nabors, and Vast Renewables Limited completed their previously announced business combination.

Segment Results

The U.S. Drilling segment reported fourth quarter adjusted EBITDA of $118.4 million, compared to $117.4 million in the third quarter. Nabors exited the year with 74 rigs on revenue in the Lower 48 market, while the fourth quarter average rig count totaled 70. Daily adjusted gross margin in the Lower 48 market averaged $16,240, an increase of $385 sequentially. This improvement reflected slightly higher daily revenue and reduced operating expenses. For the full year, EBITDA margins for U.S. Drilling increased by 600 basis points to 44.2%.

International Drilling adjusted EBITDA totaled $105.5 million, compared to $96.2 million in the third quarter. The additional rigs in Saudi Arabia and Colombia drove the increase. International rig count averaged 80, up from 77 in the previous quarter. Daily adjusted gross margin for the fourth quarter averaged $16,651, up approximately 6% from the third quarter, on improved operational performance.

Drilling Solutions adjusted EBITDA increased sequentially by approximately $4.1 million, to $34.5 million. Revenue growth of 6% was led by a 13% expansion in international operations. Drilling Solutions gross margin increased by 120 basis points to 52.4%.

In Rig Technologies, adjusted EBITDA reached $8.8 million, a 22% sequential improvement. Seasonal increases in third-party equipment revenue and higher aftermarket sales led to wider margins.

Adjusted Free Cash Flow

Adjusted free cash flow was $52 million in the fourth quarter, a $57 million improvement versus the prior period. Capital expenditures totaled $124 million, which included $43 million for the newbuilds in Saudi Arabia. This compares to $157 million in the third quarter, including $52 million supporting the newbuilds.

William Restrepo, Nabors CFO, stated, "Results across our operations were impressive. EBITDA rebounded close to the levels of the first half and was significantly above our projections. In the Lower 48, we were able to add the expected number of rigs, albeit later in the quarter than we originally envisioned. Our revenue per day and daily gross margin improved sequentially. Market pricing for rigs was stable, and our efforts to reduce costs paid off. Looking ahead to the first quarter, we expect a high level of rig churn to keep our average rig count essentially in line with the fourth quarter exit rate. As operating rigs continue to reprice to the current market, we expect some erosion in daily margin.

"Internationally we deployed rigs at attractive pricing. Reduced operating expenses and improved execution, particularly in Saudi Arabia, drove higher daily gross margins. In the first quarter, we expect newbuilds in Saudi Arabia and the initial startups in Algeria to increase our rig count.

"Drilling Solutions and Rig Technologies fourth quarter results benefitted from strong performance software and casing running revenue, as well as higher seasonal capital equipment shipments.

"During the fourth quarter, we completed a $650 million senior note offering due in 2030. With the proceeds, we have already retired both of our nearest pending maturities: the convertibles due in January 2024 and the senior notes due in 2025. Our next maturity is in 2026.

"As we enter 2024, we expect to build on our 2023 results. In the U.S., our annual average rig count for 2024 should approach the prior year's level. We have a robust international deployment schedule in 2024, and the number of incremental opportunities continues to grow. Adoption of the NDS portfolio is still expanding, particularly on third party rigs and in international markets. Increased global drilling activity should benefit Rig Technologies. Additionally, increasing client focus on improving their operating efficiencies should drive demand for our automation solutions, while their goal to simultaneously reduce their environmental impact should drive demand for our energy transition offering.

"We still have a number of open international tenders and potential upside in activity level for the Lower 48. While it is still early in the year, we do expect to deliver a significant improvement in adjusted free cash flow, compared to the level of 2023. We plan to allocate the 2024 cash flow generation to reducing our net debt."

Outlook

Nabors expects the following metrics for the first quarter of 2024:

U.S. Drilling               

• Lower 48 average rig count of 73 - 75 rigs
• Lower 48 daily adjusted gross margin of approximately $15,300
• Alaska and Gulf of Mexico adjusted EBITDA up by $1.5 to $2.0 million

International

• Average rig count up by approximately two rigs versus the fourth quarter average
• Daily adjusted gross margin of approximately $16,100 - $16,300

Drilling Solutions

• Adjusted EBITDA of $30 - $31 million

Rig Technologies

• Adjusted EBITDA of $5 - $6 million

Capital Expenditures

• Capital expenditures of $170 - $180 million, with approximately $50 million for the newbuilds in Saudi Arabia

Mr. Petrello concluded, "As we look to 2024, we expect our financial performance to accelerate. International rig awards already in hand should drive growth this year. We are currently in negotiations and tendering for a significant number of additional international rigs. Assuming we are successful, those would provide further growth into and through 2025. At the same time, demand for our advanced technology solutions is expanding across the global customer set. With these drivers, I am optimistic we are on the right path."

About Nabors Industries

Nabors Industries (NYSE:NBR) is a leading provider of advanced technology for the energy industry. With presence in more than 20 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and responsible energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower-carbon world. Learn more about Nabors and its energy technology leadership: www.nabors.com.

Forward-looking Statements

The information included in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to a number of risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements. The forward-looking statements contained in this press release reflect management's estimates and beliefs as of the date of this press release. Nabors does not undertake to update these forward-looking statements. 

Non-GAAP Disclaimer

This press release presents certain "non-GAAP" financial measures. The components of these non-GAAP measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, investment income (loss), and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to make. Net debt is calculated as total debt minus the sum of cash, cash equivalents and short-term investments.

Adjusted free cash flow represents net cash provided by operating activities less cash used for capital expenditures, net of proceeds from sales of assets. Management believes that adjusted free cash flow is an important liquidity measure for the company and that it is useful to investors and management as a measure of the company's ability to generate cash flow, after reinvesting in the company for future growth, that could be available for paying down debt or other financing cash flows, such as dividends to shareholders. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies.

Each of these non-GAAP measures has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including Adjusted EBITDA, adjusted operating income (loss), net debt, and adjusted free cash flow, because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance. Securities analysts and investors also use these measures as some of the metrics on which they analyze the Company's performance. Other companies in this industry may compute these measures differently. Reconciliations of consolidated adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes, net debt to total debt, and adjusted free cash flow to net cash provided by operations, which are their nearest comparable GAAP financial measures, are included in the tables at the end of this press release. We do not provide a forward-looking reconciliation of our outlook for Segment Adjusted EBITDA, Segment Gross Margin or Adjusted Free Cash Flow, as the amount and significance of items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.

Investor Contacts: William C. Conroy, CFA, Vice President of Corporate Development & Investor Relations, +1 281-775-2423 or via e-mail [email protected], or Kara Peak, Director of Corporate Development & Investor Relations, +1 281-775-4954 or via email [email protected]. To request investor materials, contact Nabors' corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail [email protected]  

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Nabors Industries Ltd.