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Nabors Announces Third Quarter 2020 Results

Nabors Announces Third Quarter 2020 Results

Nov 3, 2020

HAMILTON, Bermuda, Nov. 3, 2020 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors" or the "Company") (NYSE: NBR) today reported third quarter 2020 operating revenues of $438 million, compared to operating revenues of $534 million in the second quarter of 2020. The net loss from continuing operations attributable to Nabors common shareholders for the quarter was $161 million, or $23.42 per share, compared to a loss of $152 million, or $22.13 per share in the prior quarter. After-tax charges in the third quarter totaled $4 million, or $0.61 per share, primarily related to severance costs. In the second quarter, after-tax charges totaled $54 million, or $7.68 per share, mainly from asset impairments and severance costs.

For the third quarter, adjusted EBITDA was $114 million, compared to $154 million in the prior quarter. Nabors' global drilling rig count declined by 11%, driven by a 16% reduction in its Lower 48 rig count, while the quarterly average rig count for this market fell by 37%. International rigs decreased by 11, or 13%. The majority of Nabors global rig decline resulted from temporary suspensions of rigs in Saudi Arabia, as well as contract cancellations in Kazakhstan, Colombia and Algeria. Several rigs in international markets continued on reduced or standby rates due to COVID restrictions. The third quarter benefited from a positive revenue adjustment of approximately $6 million, related to favorable outcomes in pricing negotiations across our International Drilling segment. Second quarter results benefited from one-time net gains of approximately $8 million, primarily reflecting revenue from early terminations on international drilling contracts.

Anthony G. Petrello, Nabors Chairman, CEO and President, commented, "Our third quarter results were somewhat better than we expected. We executed well across the enterprise. Even as activity deteriorated as anticipated, margins were better than we projected in the Lower 48 and International rig markets. The spending reductions we implemented earlier this year supported our free cash flow generation and a modest improvement in net debt.

"The third quarter appears to mark an inflection point in the Lower 48 industry rig market, which has risen some 52 rigs, or 23%, from the level in mid-August. This momentum bolstered our own rig count through the quarter, and supported daily rig margins in the face of challenging industry utilization. Based on quarterly average working rig counts, we increased our Lower 48 market share by approximately three points sequentially, and in the third quarter held approximately a 15% share. In a difficult environment, this gain demonstrates growing client preference for our value proposition.

"We expect activity in the Lower 48 to continue improving. As we place rigs back to work, pricing on these rigs should be meaningfully below our Lower 48 fleet average. We have mitigated pricing erosion with significant reductions to our direct costs. Nonetheless, the full impact of current market pricing on our margins still lies ahead.

"In our International Drilling segment, rig count declined by 11 rigs. This change primarily reflects reduced activity in the Eastern Hemisphere in reaction to weak market fundamentals. Temporary suspensions accounted for most of the quarter's reduction in rig count. We expect our suspended rigs to resume operations beginning in early 2021. In addition to this reduction in activity, our revenue continues to be affected materially by lower negotiated and standby rates reflecting COVID restrictions in a few markets.

"Activity trends in our international markets are mixed. We continue to see a gradual recovery in the Latin America markets. During the third quarter, we drilled a record well for an operator in Argentina. As a direct result of this performance, we have been awarded additional content from our Drilling Solutions portfolio on future wells, displacing incumbent competitors in the process.

"In the Eastern Hemisphere, we have experienced further activity suspensions in the fourth quarter. Although we expect our International rig count to decline during the remainder of the year, we anticipate it to stabilize by year end and gradually improve throughout 2021.

"The resurgence of COVID, and the recent volatility in oil prices, may temper this improvement in the market. Those factors notwithstanding, we remain focused on cost and capital discipline in order to generate free cash flow and reduce net debt."

Consolidated and Segment Results

The U.S. Drilling segment reported $60.5 million in adjusted EBITDA for the third quarter of 2020, a $17.1 million, or 22%, reduction from the prior quarter. During the quarter, Nabors' Lower 48 rig count, at 48, decreased by 9 rigs, or 16%. Average daily margins in the Lower 48 narrowed by $922, to $9,527, driven by a reduction in pricing of approximately $1,500 per day. The Company reduced daily operating costs by about $600 per day to help mitigate the weaker dayrates. The U.S. segment's rig count currently stands at 58, with 53 rigs on rate in the Lower 48. Nabors' rig count troughed at 45 rigs and has since recovered on increased market demand. Based on the Company's current outlook, the fourth quarter average Lower 48 rig count is expected to increase by two to four rigs over the third quarter average.  Fourth quarter drilling margins are expected to range between $8,500 and $9,000, reflecting additional pricing erosion. In the fourth quarter, the Company expects the U.S. Offshore and Alaska markets to experience stable activity and adjusted EBITDA in line with the third quarter.

International Drilling adjusted EBITDA declined sequentially from the prior quarter by $21.6 million, to $71.9 million. The third quarter benefited from retroactive pricing adjustments in several markets and by exceptional operating performance in Saudi Arabia. This was more than offset by the absence of the prior quarter's one-time gains related to early terminations, coupled with activity reductions across markets. The International rig count averaged 71 rigs, a 13% decline from the prior quarter. Average margin per day was $12,678, a decline of $1,413, driven by a less favorable mix and the significant drop in rig count on relatively stable field support costs.

The Company's fourth quarter outlook includes an additional four rig decline in the Eastern Hemisphere, two of which are temporary suspensions. Sequentially, Nabors expects its margins in the fourth quarter to be impacted by the absence of the third quarter retroactive revenue adjustment, and by additional costs in Saudi Arabia, related to ramping up of the SANAD rig count in preparation for resumption of activity at the beginning of next year. The Company's revenue in Mexico also will be affected by a lengthy rig move between platforms during the quarter.

Canada Drilling reported adjusted EBITDA of $2.2 million, as rig activity increased from the seasonal low in the second quarter. Average daily gross margin increased significantly as the average working rig count improved, resulting in materially better cost absorption. The third quarter rig count totaled 7.4 rigs, up by 5.2 rigs from the prior quarter. For the fourth quarter of 2020, the Company expects rig activity at least equal to the third quarter.

In Drilling Solutions, adjusted EBITDA of $7.1 million declined by $2.3 million, or 24%, compared to the second quarter, due to reduced activity across service lines together with continued price erosion. The segment's activity level is closely linked to the total Lower 48 rig count with significant activity lost both on Nabors and third-party rigs. 

In the Rig Technologies segment, third quarter adjusted EBITDA was $1.3 million, down from the prior quarter adjusted EBITDA of $3.2 million. Lower capital equipment sales were the largest driver of the decline in segment results. The Company expects fourth quarter adjusted EBITDA for Drilling Solutions and Rig Technologies to remain roughly in line with the third quarter results.

Free Cash Flow and Capital Discipline

Capital expenditures were $39 million in the third quarter, and totaled $149 million for the first nine months of 2020. The Company expects capital expenditures of approximately $200 million for the full year.

Free cash flow, defined as net cash provided by operating activities less net cash used by investing activities, as presented in our cash flow statement, reached $9 million in the third quarter. These results include the impact of approximately $80 million in semiannual interest payments on senior notes during the third quarter. In September, the Company redeemed $139 million of its 5.00% notes at maturity. Total debt increased by $14 million during the third quarter and net debt, defined as total debt less cash, cash equivalents and short-term investments, declined by $6 million. Cash, cash equivalents and short-term investments closed at $514 million, a $20 million increase over the prior quarter. Subsequent to the end of the third quarter, the Company's indirect wholly-owned subsidiary, Nabors Industries, Inc., completed a private transaction in which $115 million in principal amount of its 0.75% Senior Exchangeable Notes due 2024 were exchanged for approximately $50.5 million of new 6.5% Senior Priority Guaranteed Notes due 2025. 

William Restrepo, Nabors CFO, stated, "The third quarter environment continued to test the strength of our Company. Despite the challenges we face, there were many encouraging signs. Our team in the U.S. continued to deliver robust daily margins for the Lower 48 market and superior HSE performance, while maintaining our relative market share performance. We managed to conclude negotiations with several clients. This will allow us to resume collections of our receivables with these customers. Our activity overall has held up better than we thought, which resulted in strong adjusted EBITDA for the quarter. As promised, we once again delivered positive free cash flow, despite some deterioration in our DSOs and the semiannual interest payments on our notes. As a reminder, interest payments on our notes occur in the first and third quarters.

"We reduced overhead costs beginning in the second quarter. We made further progress in the third quarter. G&A, R&E and field support expenses totaled $85.4 million, an improvement versus $89.1 million in the second quarter. We expect those costs to remain at a similar level in the fourth quarter. Our cost and capital discipline has helped us absorb the difficult market trends. 

"Although Lower 48 activity appears to have troughed, pricing remains weak. The International rig count continues to decline and our smaller segments are not pulling their weight. We expect our adjusted EBITDA to decrease materially in the fourth quarter and consequently will continue to focus on our costs and capital expenditures. Despite lower adjusted EBITDA, we anticipate free cash flow for the fourth quarter of approximately $90 million to $100 million. As we have done these past years, we will continue to use our free cash flow to reduce our debt levels."

Mr. Petrello concluded, "While we remain focused on our financial goals, we are positioning the Company for the next upturn.

"Digitalization, analytics and automation will be the enabling technologies in the future. These transformations are already underway, and Nabors continues to drive these innovations.

"Our recently introduced RigCLOUD® digital platform, which is already gaining momentum with multiple major clients, is the central element of our comprehensive digital strategy. Our near-term objective for this leading-edge technology is to expand its penetration into the full range of clients. Further development of this technology and additional scale will be keys to our success.

"I would again like to thank our employees for their efforts and sacrifices in this trying environment. We owe our success to the hard work and dedication of the industry's best and safest workforce."

About Nabors

Nabors (NYSE: NBR) owns and operates one of the world's largest land-based drilling rig fleets and provides offshore platform rigs in the United States and several international markets. Nabors also provides directional drilling services, tubular services, performance software, and innovative technologies for its own rig fleet and those of third parties. Leveraging advanced drilling automation capabilities, Nabors highly skilled workforce continues to set new standards for operational excellence and transform the industry.

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 may present 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, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges 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.  Free cash flow represents net cash provided by operating activities less cash used for investing activities. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base. 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 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 free cash flow to cash flow provided by operations, which are their nearest comparable GAAP financial measures, are included in the tables at the end of this press release. 

Media ContactWilliam C. Conroy, Vice President of Corporate Development & Investor Relations, +1 281-775-2423, or Kara Peak, Director of Corporate Development & Investor Relations, +1 281-775-4954.   To request investor materials, contact Nabors' corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail mark.andrews@nabors.com

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

           
  

Three Months Ended

 

Nine Months Ended

  

September 30,

 

June 30,

 

September 30,

(In thousands, except per share amounts)

 

2020

 

2019

 

2020

 

2020

 

2019

           

Revenues and other income:

          

Operating revenues 

 

$            438,352

 

$            758,076

 

$            533,931

 

$         1,690,647

 

$         2,329,122

Earnings (losses) from unconsolidated affiliates

 

-

 

-

 

-

 

-

 

(5)

Investment income (loss)

 

(742)

 

(1,437)

 

2,036

 

(1,904)

 

8,709

Total revenues and other income

 

437,610

 

756,639

 

535,967

 

1,688,743

 

2,337,826

           

Costs and other deductions:

          

Direct costs

 

270,397

 

475,461

 

326,557

 

1,058,794

 

1,493,082

General and administrative expenses

 

46,168

 

63,577

 

46,244

 

149,796

 

196,159

Research and engineering

 

7,565

 

12,004

 

7,305

 

26,279

 

37,444

Depreciation and amortization

 

206,862

 

221,557

 

211,120

 

645,045

 

650,267

Interest expense

 

52,403

 

51,291

 

51,206

 

158,331

 

155,134

Impairments and other charges

 

5,017

 

3,629

 

57,852

 

339,303

 

106,007

Other, net

 

(425)

 

5,005

 

(30,795)

 

(48,330)

 

30,598

Total costs and other deductions

 

587,987

 

832,524

 

669,489

 

2,329,218

 

2,668,691

           

Income (loss) from continuing operations before income taxes

 

(150,377)

 

(75,885)

 

(133,522)

 

(640,475)

 

(330,865)

Income tax expense (benefit)

 

(3,695)

 

23,903

 

4,446

 

18,444

 

65,100

           

Income (loss) from continuing operations, net of tax

 

(146,682)

 

(99,788)

 

(137,968)

 

(658,919)

 

(395,965)

Income (loss) from discontinued operations, net of tax

 

22

 

157

 

23

 

(48)

 

(34)

           

Net income (loss)

 

(146,660)

 

(99,631)

 

(137,945)

 

(658,967)

 

(395,999)

Less: Net (income) loss attributable to noncontrolling interest

 

(10,805)

 

(19,297)

 

(10,167)

 

(38,437)

 

(44,202)

Net income (loss) attributable to Nabors

 

$           (157,465)

 

$           (118,928)

 

$           (148,112)

 

$           (697,404)

 

$           (440,201)

Less: Preferred stock dividend

 

$               (3,653)

 

$               (4,310)

 

$               (3,653)

 

$             (10,958)

 

$             (12,935)

Net income (loss) attributable to Nabors common shareholders

 

$           (161,118)

 

$           (123,238)

 

$           (151,765)

 

$           (708,362)

 

$           (453,136)

           

Amounts attributable to Nabors common shareholders:

          

Net income (loss) from continuing operations

 

$           (161,140)

 

$           (123,395)

 

$           (151,788)

 

$           (708,314)

 

$           (453,102)

Net income (loss) from discontinued operations

 

22

 

157

 

23

 

(48)

 

(34)

Net income (loss) attributable to Nabors common shareholders

 

$           (161,118)

 

$           (123,238)

 

$           (151,765)

 

$           (708,362)

 

$           (453,136)

           

Earnings (losses) per share:

          

Basic from continuing operations

 

$               (23.42)

 

$               (18.27)

 

$               (22.13)

 

$             (102.25)

 

$               (66.70)

Basic from discontinued operations

 

-

 

0.02

 

-

 

(0.01)

 

-

Total Basic

 

$               (23.42)

 

$               (18.25)

 

$               (22.13)

 

$             (102.26)

 

$               (66.70)

           

Diluted from continuing operations

 

$               (23.42)

 

$               (18.27)

 

$               (22.13)

 

$             (102.25)

 

$               (66.70)

Diluted from discontinued operations

 

-

 

0.02

 

-

 

(0.01)

 

-

Total Diluted

 

$               (23.42)

 

$               (18.25)

 

$               (22.13)

 

$             (102.26)

 

$               (66.70)

           
           

Weighted-average number of common shares outstanding:

          

   Basic 

 

7,064

 

7,041

 

7,052

 

7,056

 

7,029

   Diluted 

 

7,064

 

7,041

 

7,052

 

7,056

 

7,029

           
           

Adjusted EBITDA

 

$            114,222

 

$            207,034

 

$            153,825

 

$            455,778

 

$            602,437

           

Adjusted operating income (loss)

 

$             (92,640)

 

$             (14,523)

 

$             (57,295)

 

$           (189,267)

 

$             (47,830)

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

       
       
  

September 30,

 

June 30,

 

December 31,

(In thousands)

 

2020

 

2020

 

2019

  

(Unaudited)

  

ASSETS

      

Current assets:

      

Cash and short-term investments

 

$             513,825

 

$             494,278

 

$             452,496

Accounts receivable, net

 

347,212

 

349,005

 

453,042

Assets held for sale

 

562

 

562

 

2,530

Other current assets

 

301,413

 

309,077

 

340,598

     Total current assets

 

1,163,012

 

1,152,922

 

1,248,666

Property, plant and equipment, net

 

4,225,034

 

4,395,725

 

4,930,549

Goodwill

 

-

 

-

 

28,380

Other long-term assets

 

429,262

 

433,768

 

553,063

     Total assets

 

$          5,817,308

 

$          5,982,415

 

$          6,760,658

       

LIABILITIES AND EQUITY

      

Current liabilities:

      

Current portion of debt

 

$                         -

 

$                         -

 

$                         -

Other current liabilities

 

486,018

 

523,690

 

656,548

     Total current liabilities

 

486,018

 

523,690

 

656,548

Long-term debt

 

3,290,303

 

3,276,103

 

3,333,220

Other long-term liabilities

 

242,737

 

241,005

 

295,333

     Total liabilities

 

4,019,058

 

4,040,798

 

4,285,101

       

Redeemable noncontrolling interest in subsidiary

 

438,486

 

434,131

 

425,392

       

Equity:

      

Shareholders' equity

 

1,255,648

 

1,413,147

 

1,982,811

Noncontrolling interest

 

104,116

 

94,339

 

67,354

     Total equity

 

1,359,764

 

1,507,486

 

2,050,165

     Total liabilities and equity

 

$          5,817,308

 

$          5,982,415

 

$          6,760,658

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SEGMENT REPORTING

(Unaudited)

            

The following tables set forth certain information with respect to our reportable segments and rig activity:

            
            
   

Three Months Ended

 

Nine Months Ended

   

September 30,

 

June 30,

 

September 30,

(In thousands, except rig activity)

 

2020

 

2019

 

2020

 

2020

 

2019

            

Operating revenues:

          
 

U.S. Drilling

 

$            130,243

 

$            307,808

 

$            173,784

 

$            578,928

 

$            951,419

 

Canada Drilling

 

10,774

 

12,191

 

3,564

 

39,929

 

48,895

 

International Drilling

 

248,392

 

328,278

 

301,078

 

886,580

 

992,439

 

Drilling Solutions

 

29,324

 

62,286

 

33,129

 

117,837

 

192,291

 

Rig Technologies (1)

 

28,466

 

63,106

 

33,582

 

104,198

 

207,610

 

Other reconciling items (2)

 

(8,847)

 

(15,593)

 

(11,206)

 

(36,825)

 

(63,532)

 

Total operating revenues

 

$            438,352

 

$            758,076

 

$            533,931

 

$         1,690,647

 

$         2,329,122

            

Adjusted EBITDA: (3)

          
 

U.S. Drilling

 

$              60,520

 

$            120,936

 

$              77,659

 

$            239,988

 

$            370,865

 

Canada Drilling

 

2,150

 

1,466

 

(564)

 

9,517

 

9,981

 

International Drilling

 

71,885

 

95,214

 

93,510

 

256,904

 

267,825

 

Drilling Solutions

 

7,129

 

23,471

 

9,411

 

35,979

 

66,978

 

Rig Technologies (1)

 

1,309

 

2,173

 

3,176

 

1,307

 

3,037

 

Other reconciling items (4)

 

(28,771)

 

(36,226)

 

(29,367)

 

(87,917)

 

(116,249)

 

Total adjusted EBITDA

 

$            114,222

 

$            207,034

 

$            153,825

 

$            455,778

 

$            602,437

            

Adjusted operating income (loss): (5)

          
 

U.S. Drilling

 

$             (39,162)

 

$              12,427

 

$             (23,395)

 

$             (69,961)

 

$              57,502

 

Canada Drilling

 

(3,507)

 

(5,701)

 

(5,795)

 

(9,265)

 

(11,297)

 

International Drilling

 

(16,872)

 

2,466

 

276

 

(20,743)

 

(10,055)

 

Drilling Solutions

 

(3,583)

 

16,145

 

1,733

 

8,699

 

42,793

 

Rig Technologies (1)

 

(1,807)

 

(641)

 

(1,492)

 

(11,450)

 

(5,293)

 

Other reconciling items (4)

 

(27,709)

 

(39,219)

 

(28,622)

 

(86,547)

 

(121,480)

 

Total adjusted operating income (loss)

 

$             (92,640)

 

$             (14,523)

 

$             (57,295)

 

$           (189,267)

 

$             (47,830)

            

Rig activity:

          

Average Rigs Working: (6)

          
 

     Lower 48

 

48.2

 

107.8

 

57.2

 

64.7

 

111.3

 

     Other US

 

5.2

 

6.3

 

6.6

 

6.4

 

7.7

 

U.S. Drilling

 

53.4

 

114.1

 

63.8

 

71.1

 

119.0

 

Canada Drilling

 

7.4

 

7.7

 

2.2

 

8.8

 

10.4

 

International Drilling

 

71.3

 

87.7

 

82.4

 

80.1

 

88.7

 

Total average rigs working

 

132.1

 

209.5

 

148.4

 

160.0

 

218.1

            

Daily Rig Revenue:

          
 

     Lower 48

 

$              21,764

 

$              25,895

 

$              24,744

 

$              25,120

 

$              25,827

 

     Other US

 

71,175

 

87,485

 

74,825

 

76,214

 

78,872

 

U.S. Drilling (8)

 

26,548

 

29,301

 

29,927

 

29,712

 

29,278

 

Canada Drilling

 

15,867

 

17,248

 

18,105

 

16,622

 

17,199

 

International Drilling

 

37,842

 

40,671

 

40,129

 

40,375

 

40,997

            

Daily Rig Margin: (7)

          
 

     Lower 48

 

$                9,527

 

$              10,231

 

$              10,449

 

$                9,964

 

$              10,208

 

     Other US

 

48,636

 

49,446

 

46,032

 

45,861

 

41,853

 

U.S. Drilling (8)

 

13,314

 

12,400

 

14,132

 

13,190

 

12,267

 

Canada Drilling

 

4,203

 

3,799

 

899

 

4,880

 

4,955

 

International Drilling

 

12,678

 

13,739

 

14,091

 

13,446

 

12,990

            

 

             

(1)

Includes our oilfield equipment manufacturing, automated systems, and downhole tools.

             

(2)

Represents the elimination of inter-segment transactions related to our Rig Technologies operating segment.

             

(3)

Adjusted EBITDA represents income (loss) from continuing operations before income taxes, interest expense, depreciation and amortization, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted EBITDA is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted EBITDA excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.  Securities analysts and investors use this measure as one of the metrics on which they analyze the Company's performance.  Other companies in this industry may compute these measures differently.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

             

(4)

Represents the elimination of inter-segment transactions and unallocated corporate expenses.

             

(5)

Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted operating income (loss) is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted operating income (loss) excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.  Securities analysts and investors use this measure as one of the metrics on which they analyze the Company's performance.  Other companies in this industry may compute these measures differently.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

             

(6)

Represents a measure of the average number of rigs operating during a given period.  For example, one rig operating 45 days during a quarter represents approximately 0.5 average rigs working for the quarter.  On an annual period, one rig operating 182.5 days represents approximately 0.5 average rigs working for the year.

             

(7)

Daily rig margin represents operating revenue less operating expenses, divided by the total number of revenue days during the quarter.   

             

(8)

The U.S. Drilling segment includes the Lower 48, Alaska, and Gulf of Mexico operating areas.

 

 

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO 

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)

           
           
  

Three Months Ended

 

Nine Months Ended

  

September 30,

 

June 30,

 

September 30,

(In thousands)

 

2020

 

2019

 

2020

 

2020

 

2019

           

Adjusted EBITDA

 

$            114,222

 

$            207,034

 

$            153,825

 

$            455,778

 

$            602,437

Depreciation and amortization 

 

(206,862)

 

(221,557)

 

(211,120)

 

(645,045)

 

(650,267)

Adjusted operating income (loss)

 

(92,640)

 

(14,523)

 

(57,295)

 

(189,267)

 

(47,830)

           

Earnings (losses) from unconsolidated affiliates

 

-

 

-

 

-

 

-

 

(5)

Investment income (loss)

 

(742)

 

(1,437)

 

2,036

 

(1,904)

 

8,709

Interest expense

 

(52,403)

 

(51,291)

 

(51,206)

 

(158,331)

 

(155,134)

Impairments and other charges

 

(5,017)

 

(3,629)

 

(57,852)

 

(339,303)

 

(106,007)

Other, net

 

425

 

(5,005)

 

30,795

 

48,330

 

(30,598)

Income (loss) from continuing operations before income taxes

 

$           (150,377)

 

$             (75,885)

 

$           (133,522)

 

$           (640,475)

 

$           (330,865)

 

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

 
       
  

September 30,

 

June 30,

 

December 31,

(In thousands)

 

2020

 

2020

 

2019

  

(Unaudited)

  
       

Current portion of debt

 

$                         -

 

$                         -

 

$                         -

Long-term debt

 

3,290,303

 

3,276,103

 

3,333,220

     Total Debt

 

3,290,303

 

3,276,103

 

3,333,220

Less: Cash and short-term investments

 

513,825

 

494,278

 

452,496

     Net Debt

 

$          2,776,478

 

$          2,781,825

 

$          2,880,724

 

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF FREE CASH FLOW TO

NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 
       
  

Three Months Ended

 

Nine Months Ended

  

September 30,

 

June 30,

 

September 30,

(In thousands)

 

2020

 

2020

 

2020

       

Net cash provided by operating activities

 

$               46,134

 

$             142,610

 

$             247,906

Less: Net cash used for investing activities

 

(37,193)

 

(41,376)

 

(129,342)

Free cash flow

 

$                 8,941

 

$             101,234

 

$             118,564

 

 

Free cash flow represents net cash provided by operating activities less cash used for investing activities. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. This non-GAAP measure 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 the consolidated Company based on several criteria, including free cash flow, because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.

 

 

 

SOURCE Nabors Industries Ltd.