UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) October 27, 2015

 

NABORS INDUSTRIES LTD.

(Exact name of registrant as specified in its charter)

 

Bermuda

 

001-32657

 

98-0363970

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Commission File Number)

 

(I.R.S. Employer
Identification No.)

 

Crown House
4 Par-la-Ville Road
Second Floor
Hamilton, HM08 Bermuda

 

N/A

(Address of principal executive offices)

 

(Zip Code)

 

(441) 292-1510

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02              Results of Operations and Financial Condition.

 

On October 27, 2015, we issued a press release announcing our results of operations for the three- and nine-month period ended September 30, 2015.  A copy of that release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

 

The 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 risks and uncertainties, as disclosed from time to time in our filings with the Securities and Exchange Commission.  As a result of these factors, our actual results may differ materially from those indicated or implied by such forward-looking statements.

 

We also presented in the press release certain “non-GAAP” financial measures.  We presented our adjusted EBITDA and adjusted income (loss) derived from operating activities for all periods presented in the release. 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 EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and earnings (losses) from our equity method investment from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates.  Adjusted income (loss) derived from operating activities is computed similarly, but also subtracts depreciation and amortization expenses from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. As part of the press release information, we have provided a reconciliation of adjusted EBITDA and adjusted income (loss) derived from operating activities to income (loss) from continuing operations before income taxes, which is its nearest comparable GAAP financial measure.

 

We included our adjusted EBITDA and adjusted income (loss) derived from operating activities in the release because management evaluates the performance of our business units and the consolidated company based on several criteria, including these non-GAAP measures, and because we believe these financial measures are an accurate reflection of our ongoing profitability.  There are, however, certain limitations to these measures and therefore they should be considered in addition to and not as an alternative to our results in accordance with GAAP.

 

Item 8.01.                                        Other Events.

 

On October 28, 2015, we will present certain information in connection with our call with shareholders, analysts and others relating to our results of operations discussed above.  Attached hereto as Exhibit 99.2 are slides that will be presented at that time.

 

Item 9.01              Financial Statements and Exhibits.

 

(d)  Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

NABORS INDUSTRIES LTD.

 

 

 

 

Date: October 27, 2015

By:

/s/ Mark D. Andrews

 

Mark D. Andrews

 

Corporate Secretary

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

4




Exhibit 99.1

 

 

NEWS RELEASE

 

Nabors Announces Third Quarter Results

 

Notable items for the quarter:

 

·      EPS of ($0.86), including $0.72 in items, impairments and other charges related to the downturn, and $0.12 loss from unconsolidated affiliates

·      Deployed 5 remaining PACE®-X rigs to Colombia

·      Repurchased 8.3 million shares at a cost of $78.4 million

 

HAMILTON, Bermuda, October 27, 2015 — Nabors Industries Ltd. (“Nabors”) (NYSE:NBR) today reported third-quarter operating revenues of $848 million, compared to $863 million in the second quarter of 2015, and $1.81 billion in the third quarter of last year. The comparable third quarter of last year included $612 million in revenue from Completion and Production Services, a business line that merged with C&J Energy Services on March 24, 2015.  The Completion and Production Services business is no longer consolidated with Nabors, and Nabors’ results reflect equity-method accounting for this investment on a quarter-lag basis.

 

Net income from continuing operations reported for the third quarter was a loss of $250.9 million or $0.86 per diluted share.  This compares to a second-quarter net income loss from continuing operations of $41.9 million or $0.14 per diluted share.  The current results include $250.9 million in pre-tax charges or $0.79 per diluted share.  The largest portion of the charges consisted of the impairment of Nabors’ holdings in C&J Energy Services in the amount of $180.6 million.  The balance consisted of numerous small asset impairments and severance costs.  These impairments were partially offset by favorable tax adjustments of $19.1 million ($0.07 per diluted share).  The quarter also includes a net loss of $35.1 million or $0.12 per diluted share attributable to Nabors’ equity share of C&J Energy Services second quarter results.

 

Anthony Petrello, Nabors’ Chairman and CEO, commented, “Our third-quarter results were essentially in line, as increased revenue and cash flow internationally were offset by lower results in North America due to lower activity and increased exposure to spot market pricing.  We expect more moderate sequential decreases through the seasonally weak second quarter of next year with gradual declines in rig activity and more rigs converting to spot pricing both in North America and internationally.  The recent new rig deployments internationally have been on time and within budget, mitigating the impact of the idling of other high contribution rigs that would likely have been renewed had it not been for the weakening environment.  Our PACE®-X rigs continue to experience over 90% utilization and are increasingly viewed as best-in-class for pad drilling.

 

“Our view of the timing and shape of the recovery remains unchanged with an expectation of a protracted trough followed by a more gradual recovery than recent cycles.  Accordingly, we continue to exercise stringent control over our operating, support and capital spending in order to meet our minimum goal of breakeven free cash flow.  Our solid financial position and sizable liquidity allow us to remain opportunistic should attractive long-term strategic opportunities arise.”

 



 

Segment Results

 

Adjusted income derived from operating activities (“adjusted income”) in Drilling and Rig Services decreased 57% to $45.5 million from $104.9 million in the second quarter of this year.  Adjusted EBITDA in this business line was $286.0 million, primarily attributable to the International segment.  For the quarter the Company averaged 242 rigs operating at an average gross margin of $14,657 per rig day.  Future quarters are expected to show more moderate income declines as the weak commodity price environment persists and customer spending continues to slow.

 

International adjusted income decreased by 11% sequentially to $74.0 million, reflecting the impact of lower utilization.  Going forward, the Company continues to foresee the potential for further declines in its International results as several impactful drilling programs continue to wind down.  Despite the softening conditions, full-year results for the International segment are still expected to increase compared to 2014.

 

In North America, our U.S. Drilling segment experienced further decline during the quarter, resulting in a decrease in adjusted income of $45.5 million from the prior quarter.  In the Lower 48, activity declined throughout the quarter with 14% fewer rigs working.  Canada marginally improved during the third quarter after its seasonal break up, while utilization in Alaska declined seasonally by nearly 13%.  In the U.S. Gulf of Mexico, commencement of the full operating dayrate for our newest platform rig continues to be delayed for an indefinite period of time due to issues with the installation of the customer’s platform.

 

Rig Services, which consists of the Company’s manufacturing and directional drilling operations, reported negative adjusted income of $10.4 million, as the industry’s newbuild activity and drilling activity has declined.

 

Financial Discussion

 

William Restrepo, Nabors’ Chief Financial Officer, stated, “Nabors is taking measures to maintain our financial flexibility and commitment to free cash flow throughout this downcycle.  We are targeting annualized G&A reductions of at least $110 million on a comparable basis, and continue to reduce direct rig operating and field support costs in line with our expectations of near-term drilling activity.  Third quarter capital expenditures were $166 million, and we are on pace to spend approximately $900 million for the year, well below anticipated adjusted EBITDA.

 

“During the quarter we established a $325 million five-year term loan on attractive terms with three large global banks.  This represented an opportunity to lock in an attractive LIBOR spread of 117.5 basis points and in anticipation of the maturity of our $350 million senior unsecured notes due September next year.  We also took advantage of equity market volatility during the quarter by repurchasing 8.3 million shares of our common stock at an average cost of $9.47 per share.  We remain committed to emerge from this cycle a stronger and even more financially sound drilling company.”

 



 

About Nabors

 

The Nabors companies own and operate approximately 476 land drilling rigs throughout the world. Nabors’ actively marketed offshore fleet consists of six jackups and 36 platform rigs in the United States and multiple international markets. Nabors also manufactures top drives, other rig components and drilling instrumentation systems.  Nabors participates in most of the significant oil and gas markets in the world.

 

Forward-looking Statements

 

The information above 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 certain 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 release reflect management’s estimates as of the date of the release.  Nabors does not undertake to update these forward-looking statements.

 

Media Contact:

 

Dennis A. Smith, Director of Corporate Development & Investor Relations, +1 281-775-8038.  To request investor materials, contact Nabors’ corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail at mark.andrews@nabors.com

 

Source:  Nabors Industries Ltd.

 



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands, except per share amounts)

 

2015

 

2014

 

2015

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

847,553

 

$

1,813,762

 

$

863,305

 

$

3,125,565

 

$

5,020,361

 

Earnings (losses) from unconsolidated affiliates

 

(35,100

)

(2,851

)

(1,116

)

(29,714

)

(5,872

)

Investment income (loss)

 

(22

)

2,189

 

1,181

 

2,128

 

10,235

 

Total revenues and other income

 

812,431

 

1,813,100

 

863,370

 

3,097,979

 

5,024,724

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

518,174

 

1,181,986

 

488,522

 

1,926,306

 

3,310,220

 

General and administrative expenses

 

81,748

 

138,967

 

86,290

 

295,171

 

406,863

 

Depreciation and amortization

 

240,107

 

286,581

 

218,196

 

739,322

 

851,528

 

Interest expense

 

44,448

 

43,138

 

44,469

 

135,518

 

134,251

 

Losses (gains) on sales and disposals of long-lived assets and other expense (income), net

 

259,731

 

(1,513

)

1,338

 

205,227

 

16,467

 

Total costs and other deductions

 

1,144,208

 

1,649,159

 

838,815

 

3,301,544

 

4,719,329

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(331,777

)

163,941

 

24,555

 

(203,565

)

305,395

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(80,898

)

61,511

 

66,445

 

(35,158

)

86,275

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary preferred stock dividend

 

 

 

 

 

1,984

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

(250,879

)

102,430

 

(41,890

)

(168,407

)

217,136

 

Income (loss) from discontinued operations, net of tax

 

(45,275

)

4,005

 

5,025

 

(41,067

)

4,488

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(296,154

)

106,435

 

(36,865

)

(209,474

)

221,624

 

Less: Net (income) loss attributable to noncontrolling interest

 

320

 

(387

)

44

 

453

 

(1,213

)

Net income (loss) attributable to Nabors

 

$

(295,834

)

$

106,048

 

$

(36,821

)

$

(209,021

)

$

220,411

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share: (1)

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(.86

)

$

.34

 

$

(.14

)

$

(.57

)

$

.72

 

Basic from discontinued operations

 

(.16

)

.02

 

.01

 

(.15

)

.02

 

Basic

 

$

(1.02

)

$

.36

 

$

(.13

)

$

(.72

)

$

.74

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(.86

)

$

.34

 

$

(.14

)

$

(.57

)

$

.71

 

Diluted from discontinued operations

 

(.16

)

.01

 

.01

 

(.15

)

.02

 

Diluted

 

$

(1.02

)

$

.35

 

$

(.13

)

$

(.72

)

$

.73

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding: (1)

 

 

 

 

 

 

 

 

 

 

 

Basic

 

284,112

 

292,621

 

286,085

 

285,186

 

292,613

 

Diluted

 

284,112

 

295,005

 

286,085

 

285,186

 

295,353

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (2)

 

$

247,631

 

$

489,958

 

$

288,177

 

$

910,274

 

$

1,297,406

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) derived from operating activities (3)

 

$

7,524

 

$

203,377

 

$

69,981

 

$

170,952

 

$

445,878

 

 


(1)                                 See “Computation of Earnings (Losses) Per Share” included herein as a separate schedule.

 

(2)                                 Adjusted EBITDA is computed by subtracting the sum of direct costs and general and administrative expenses and earnings (losses) from our equity method investment from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. Adjusted EBITDA is a non-GAAP measure and should not be used in isolation as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted EBITDA and adjusted income (loss) derived from operating activities, because we believe that these financial measures accurately reflect our ongoing profitability. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a 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”.

 

(3)                                 Adjusted income (loss) derived from operating activities is computed by subtracting the sum of direct costs, general and administrative expenses, depreciation and amortization and earnings (losses) from our equity method investment from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. These amounts should not be used as a substitute for those amounts reported in accordance with GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income (loss) derived from operating activities, because it believes that these financial measures accurately reflect our ongoing profitability.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a 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”.

 

1-1



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

(Unaudited)

 

 

 

 

 

September 30,

 

June 30,

 

December 31,

 

(In thousands)

 

2015

 

2015

 

2014

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

276,562

 

$

469,897

 

$

536,169

 

Accounts receivable, net

 

871,385

 

908,563

 

1,517,503

 

Assets held for sale

 

78,400

 

136,677

 

146,467

 

Other current assets

 

492,728

 

454,018

 

541,735

 

Total current assets

 

1,719,075

 

1,969,155

 

2,741,874

 

Long-term investments and other receivables

 

2,455

 

2,617

 

2,806

 

Property, plant and equipment, net

 

7,287,531

 

7,405,441

 

8,599,125

 

Goodwill

 

150,032

 

139,756

 

173,928

 

Investment in unconsolidated affiliates

 

460,543

 

676,234

 

58,251

 

Other long-term assets

 

309,545

 

324,080

 

303,958

 

Total assets

 

$

9,929,181

 

$

10,517,283

 

$

11,879,942

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current debt

 

$

8,982

 

$

66,359

 

$

6,190

 

Other current liabilities

 

1,040,569

 

1,156,394

 

1,561,285

 

Total current liabilities

 

1,049,551

 

1,222,753

 

1,567,475

 

Long-term debt

 

3,737,773

 

3,691,357

 

4,348,859

 

Other long-term liabilities

 

630,458

 

663,798

 

1,044,819

 

Total liabilities

 

5,417,782

 

5,577,908

 

6,961,153

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

4,502,313

 

4,931,960

 

4,908,619

 

Noncontrolling interest

 

9,086

 

7,415

 

10,170

 

Total equity

 

4,511,399

 

4,939,375

 

4,918,789

 

Total liabilities and equity

 

$

9,929,181

 

$

10,517,283

 

$

11,879,942

 

 

1-2



 

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)

 

2015

 

2014

 

2015

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Reportable segments:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues and Earnings (losses) from unconsolidated affiliates:

 

 

 

 

 

 

 

 

 

 

 

Drilling and Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

259,939

 

$

571,736

 

$

321,169

 

$

1,034,929

 

$

1,615,106

 

Canada

 

29,929

 

80,491

 

21,413

 

109,182

 

246,973

 

International

 

516,180

 

427,558

 

458,545

 

1,413,886

 

1,191,520

 

Rig Services (1)

 

73,521

 

191,437

 

100,599

 

318,204

 

502,509

 

Subtotal Drilling and Rig Services

 

879,569

 

1,271,222

 

901,726

 

2,876,201

 

3,556,108

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion and Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

352,018

 

 

207,860

 

856,329

 

Production Services

 

 

259,863

 

 

158,512

 

793,641

 

Subtotal Completion and Production Services

 

 

611,881

 

 

366,372

 

1,649,970

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (2)

 

(32,016

)

(69,341

)

(38,421

)

(117,008

)

(185,717

)

Total operating revenues

 

$

847,553

 

$

1,813,762

 

$

863,305

 

$

3,125,565

 

$

5,020,361

 

Earnings (losses) from unconsolidated affiliates (3)

 

(35,100

)

(2,851

)

(1,116

)

(29,714

)

(5,872

)

Total operating revenues and earnings (losses) from unconsolidated affiliates

 

$

812,453

 

$

1,810,911

 

$

862,189

 

$

3,095,851

 

$

5,014,489

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA: (4)

 

 

 

 

 

 

 

 

 

 

 

Drilling and Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

94,505

 

$

234,980

 

$

136,499

 

$

418,749

 

$

628,678

 

Canada

 

7,516

 

25,804

 

3,732

 

29,716

 

80,139

 

International

 

186,451

 

159,588

 

176,994

 

564,473

 

436,915

 

Rig Services (1)

 

(2,455

)

30,153

 

6,341

 

25,469

 

63,820

 

Subtotal Drilling and Rig Services (5)

 

286,017

 

450,525

 

323,566

 

1,038,407

 

1,209,552

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion and Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

40,507

 

 

(27,847

)

61,467

 

Production Services

 

 

49,312

 

 

23,043

 

167,635

 

Subtotal Completion and Production Services (6)

 

 

89,819

 

 

(4,804

)

229,102

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (7)

 

(38,386

)

(50,386

)

(35,389

)

(123,329

)

(141,248

)

Total adjusted EBITDA

 

$

247,631

 

$

489,958

 

$

288,177

 

$

910,274

 

$

1,297,406

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) derived from operating activities: (8)

 

 

 

 

 

 

 

 

 

 

 

Drilling and Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

(14,034

)

$

117,212

 

$

31,445

 

$

94,449

 

$

279,683

 

Canada

 

(4,085

)

11,517

 

(8,268

)

(5,995

)

37,902

 

International

 

74,039

 

68,452

 

83,255

 

262,335

 

167,154

 

Rig Services (1)

 

(10,434

)

21,136

 

(1,575

)

864

 

38,923

 

Subtotal Drilling and Rig Services (5)

 

45,486

 

218,317

 

104,857

 

351,653

 

523,662

 

 

 

 

 

 

 

 

 

 

 

 

 

Completion and Production Services:

 

 

 

 

 

 

 

 

 

 

 

Completion Services

 

 

14,211

 

 

(55,243

)

(20,005

)

Production Services

 

 

21,182

 

 

(3,296

)

81,662

 

Subtotal Completion and Production Services (6)

 

 

35,393

 

 

(58,539

)

61,657

 

 

 

 

 

 

 

 

 

 

 

 

 

Other reconciling items (7)

 

(37,962

)

(50,333

)

(34,876

)

(122,162

)

(139,441

)

Total adjusted income (loss) derived from operating activities

 

$

7,524

 

$

203,377

 

$

69,981

 

$

170,952

 

$

445,878

 

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Rig years: (9)

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

103.0

 

216.0

 

119.5

 

129.8

 

212.7

 

Canada

 

17.2

 

34.3

 

9.7

 

17.5

 

33.2

 

International (10)

 

121.3

 

130.1

 

127.1

 

126.1

 

129.1

 

Total rig years

 

241.5

 

380.4

 

256.3

 

273.4

 

375.0

 

Rig hours: (11)

 

 

 

 

 

 

 

 

 

 

 

U.S. Production Services

 

 

205,604

 

 

129,652

 

626,336

 

Canada Production Services

 

 

36,509

 

 

23,947

 

106,720

 

Total rig hours

 

 

242,113

 

 

153,599

 

733,056

 

 

1-3



 


(1)                     Includes our other services comprised of our drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software services.

 

(2)                     Represents the elimination of inter-segment transactions.

 

(3)                     Represents our share of the net income (loss) of our unconsolidated affiliates accounted for by the equity method inclusive of $(31.5) million, $(0.8) million and $(35.9) million for the three months ended September 30, 2015 and June 30, 2015 and the nine months ended September 30, 2015, respectively, representing our share of the net loss of C&J Energy Services, Ltd., reported on a one-quarter lag.

 

(4)                     Adjusted EBITDA is computed by subtracting the sum of direct costs and general and administrative expenses and earnings (losses) from our equity method investment from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. Adjusted EBITDA is a non-GAAP measure and should not be used in isolation as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted EBITDA and adjusted income (loss) derived from operating activities, because we believe that these financial measures accurately reflect our ongoing profitability. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a 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”.

 

(5)                     Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $(2.9) million and $(0.3) million for the three months ended September 30, 2014 and June 30, 2015, respectively and $5.9 million and $(6.1) million for the nine months ended September 30, 2015 and 2014, respectively.

 

(6)                     Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $0.3 million and $0.2 million for the nine months ended September 30, 2015 and 2014, respectively.

 

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

 

(8)                     Adjusted income (loss) derived from operating activities is computed by subtracting the sum of direct costs, general and administrative expenses, depreciation and amortization and earnings (losses) from our equity method investment from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. These amounts should not be used as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income (loss) derived from operating activities, because it believes that these financial measures accurately reflect our ongoing profitability. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a 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”.

 

(9)                     Excludes well-servicing rigs, which are measured in rig hours.  Includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates.  Rig years represent a measure of the number of equivalent rigs operating during a given period.  For example, one rig operating 182.5 days during a 365-day period represents 0.5 rig years.

 

(10)              International rig years includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates, which totaled 2.5 years during the three months ended September 30, 2014 and 2.5 years for the nine months ended September 30, 2014.  As of May 24, 2015, this was no longer an unconsolidated affiliate.

 

(11)              Rig hours represents the number of hours that our well-servicing rig fleet operated during the period.  This fleet was included in the Completion and Production Services business line that was merged with C&J Energy Services, Inc. in March 2015, therefore we will no longer report this performance metric.

 

1-4



 

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)

 

2015

 

2014

 

2015

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

247,631

 

$

489,958

 

$

288,177

 

$

910,274

 

$

1,297,406

 

Less: Depreciation and amortization

 

240,107

 

286,581

 

218,196

 

739,322

 

851,528

 

Adjusted income (loss) derived from operating activities

 

7,524

 

203,377

 

69,981

 

170,952

 

445,878

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) from equity method investment

 

(35,100

)

 

(800

)

(35,900

)

 

Interest expense

 

(44,448

)

(43,138

)

(44,469

)

(135,518

)

(134,251

)

Investment income (loss)

 

(22

)

2,189

 

1,181

 

2,128

 

10,235

 

Gains (losses) on sales and disposals of long-lived assets and other income (expense), net

 

(259,731

)

1,513

 

(1,338

)

(205,227

)

(16,467

)

Income (loss) from continuing operations before income taxes

 

$

(331,777

)

$

163,941

 

$

24,555

 

$

(203,565

)

$

305,395

 

 

1-5



 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

COMPUTATION OF EARNINGS (LOSSES) PER SHARE

(Unaudited)

 

A reconciliation of the numerators and denominators of the basic and diluted earnings (losses) per share computations is as follows:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(In thousands, except per share amounts)

 

2015

 

2014

 

2015

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC EPS:

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

(250,879

)

$

102,430

 

$

(41,890

)

$

(168,407

)

$

217,136

 

Less: Net (income) loss attributable to noncontrolling interest

 

320

 

(387

)

44

 

453

 

(1,213

)

Less: Redemption of preferred shares

 

 

 

 

 

(1,688

)

Less: Earnings allocated to unvested shareholders

 

5,834

 

(1,579

)

720

 

4,523

 

(3,286

)

Adjusted income (loss) from continuing operations - basic and diluted

 

$

(244,725

)

$

100,464

 

$

(41,126

)

$

(163,431

)

$

210,949

 

Income (loss) from discontinued operations, net of tax

 

$

(45,275

)

$

4,005

 

$

5,025

 

$

(41,067

)

$

4,488

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding-basic

 

284,112

 

292,621

 

286,085

 

285,186

 

292,613

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(.86

)

$

.34

 

$

(.14

)

$

(.57

)

$

.72

 

Basic from discontinued operations

 

(.16

)

.02

 

.01

 

(.15

)

.02

 

Total Basic

 

$

(1.02

)

$

.36

 

$

(.13

)

$

(.72

)

$

.74

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED EPS:

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributed to common shareholders

 

$

(244,725

)

$

100,464

 

$

(41,126

)

$

(163,431

)

$

210,949

 

Add: Effect of reallocating undistributed earnings of unvested shareholders

 

 

11

 

 

 

25

 

Adjusted income (loss) from continuing operations attributed to common shareholders

 

$

(244,725

)

$

100,475

 

$

(41,126

)

$

(163,431

)

$

210,974

 

Income (loss) from discontinued operations

 

$

(45,275

)

$

4,005

 

$

5,025

 

$

(41,067

)

$

4,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding-basic

 

284,112

 

292,621

 

286,085

 

285,186

 

292,613

 

Add: dilutive effect of potential common shares

 

 

2,384

 

 

 

2,740

 

Weighted-average number of diluted shares outstanding

 

284,112

 

295,005

 

286,085

 

285,186

 

295,353

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(.86

)

$

.34

 

$

(.14

)

$

(.57

)

$

.71

 

Diluted from discontinued operations

 

(.16

)

.01

 

.01

 

(.15

)

.02

 

Total Diluted

 

$

(1.02

)

$

.35

 

$

(.13

)

$

(.72

)

$

.73

 

 

Restricted stock grants that contain non-forfeitable rights to dividends are considered participating securities. As such, these grants are included in our basic and diluted earnings (losses) per share computation using the two-class method of accounting. For all periods presented, the computation of diluted earnings (losses) per share excluded outstanding stock options with exercise prices greater than the average market price of Nabors’ common shares because their inclusion would have been anti-dilutive and because they were not considered participating securities. The average number of options that were excluded from diluted earnings (losses) per share that would have potentially diluted earnings (losses) per share were 9,416,647, 5,389,090 and 9,860,422 shares during the three months ended September 30, 2015 and 2014 and June 30, 2015, respectively, and 9,910,476 and 6,341,624 shares during the nine months ended September 30, 2015 and 2014, respectively. In any period during which the average market price of Nabors’ common shares exceeds the exercise prices of these stock options, such stock options are included in our diluted earnings (losses) per share computation using the if-converted method of accounting.

 

1-6




Exhibit 99.2

 

3Q15 Earnings Presentation October 28, 2015 Presenters: Anthony G. Petrello Chairman, President & Chief Executive Officer William J. Restrepo Chief Financial Officer

GRAPHIC

 


Forward-Looking Statements We often discuss expectations regarding our markets, demand for our products and services, and our future performance in our annual and quarterly reports, press releases, and other written and oral statements. Such statements, including statements in this document incorporated by reference that relate to matters that are not historical facts are “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the U.S. Securities Exchange Act of 1934. These “forward-looking statements” are based on our analysis of currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events and actual results could turn out to be significantly different from our expectations. Factors to consider when evaluating these forward-looking statements include, but are not limited to: • • • • • • • • fluctuations in worldwide prices and demand for natural gas and oil; fluctuations in levels of natural gas and oil exploration and development activities; fluctuations in the demand for our services; the existence of competitors, technological changes and developments in the oilfield services industry; our ability to complete, and realize the expected benefits of, any strategic transactions; the existence of operating risks inherent in the oilfield services industry; the possibility of changes in tax laws and other laws and regulations; the possibility of political or economic instability, civil disturbance, war or acts of terrorism in any of the countries in which we do business; and general economic conditions including the capital and credit markets. • Our businesses depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Therefore, a continued decrease in the price of natural gas or oil, which could have a material impact on exploration and production activities, could also materially affect our financial position, results of operations and cash flows. The above description of risks and uncertainties is by no means all inclusive, but is designed to highlight what we believe are important factors to consider. Statements made in this presentation include non-GAAP financial measures. The required reconciliation to the nearest comparable GAAP financial measures is included in the investor relations section of our website. 2

GRAPHIC

 


Recent Highlights 1111, NABORS 3

GRAPHIC

 


Financial Summary ($000 except EPS) 3Q14 4Q14 1Q15 2Q15 3Q15 Operating Revenues $1,813,762 $1,783,836 $1,414,707 $863,305 $847,553 Adjusted EBITDA 489,958 445,692 374,466 288,177 247,631 Adjusted Income 203,377 152,120 93,447 69,981 7,524 GAAP Diluted EPS(1) 0.34(2) (3.06)(3) 0.43(4) (0.14)(5) (0.86)(6) (1) (2) Diluted Earnings Per Share from continuing operations Includes charges of 5¢ per share for income tax and merger-related fees, net of early termination payment, gain on sale of Alaska E&P and other items Includes charges and impairments of $3.39 per share related to asset impairments and transaction costs Includes net benefit of 23¢ per share for net gain from the C&J Energy Services transaction, tax benefits from various international jurisdictions, and severance charges from workforce reductions Includes 23¢ per share of tax expense Includes 7¢ in favorable tax adjustments as well as charges and impairments of 79¢ related to our holdings in C&J Energy Services Ltd., other small asset impairments, and severance costs (3) (4) (5) (6) 4

 


Current Debt and Liquidity Liquidity(4) (at September 30, 2015) • Cash & Available Capacity: $2,481 Investment in Affiliate (at September 30, 2015) • C&J Energy Services shares: $ 220 (1) (2) (3) (4) Capitalization defined as Net Debt plus Shareholders’ Equity Coverage defined as TTM Adjusted EBITDA / TTM Interest Expense Leverage defined as Total Debt / TTM Adjusted EBITDA Includes the proceeds from the term loan in September 2015 Note: Subtotals may not foot due to rounding 5 High 2Q15 3Q15 Change Change ($MM's) 3/31/12 6/30/15 9/30/15 2Q15 to 3Q15 3Q15 from High Total Debt Cash and ST Investments Net Debt Shareholder’s Equity Net Debt to Capitalization(1) Coverage(2) Leverage(3) $4,773 $3,758 $3,747 ($11) ($1,026) 494 470 277 (193) (217) $4,279 $3,288 $3,470 182 ($809) 5,811 4,932 4,502 (430) (1,309) 42.4% 40.0% 44.0% 4.0% 1.6% 7.8x 9.0x 7.6x (1.4x) (0.2x) 2.5x 2.4x 2.8x 0.4x 0.3x

GRAPHIC

 


Drilling & Rig Services 1111, NABORS 6

GRAPHIC

 


3Q15 Rig Utilization & Availability 3Q15 Rig Average Rig Fleet(1) Years Utilization U.S. Lower 48 AC Legacy U.S. Lower 48 Total U.S. Offshore Alaska 172 85 257 17 19 79 10 89 7 7 46% 12% 35% 41% 37% 63 17 27% Canada International 180 121 67% Subtotal PACE®-X Construction(2) Intl. Newbuilds & Upgrades(2) U.S. & Intl. Offshore Newbuilds(2) 536 3 1 1 242 45% Total Fleet 541 (1) As of 9/30/15 (2) Includes announced newbuild commitments and rigs to be completed in 2015 Numbers may not calculate due to rounding 7

GRAPHIC

 


3Q15 U.S. Rig Utilization Power Type and Pad Capability % As of 9/30/15 8 Walking Skidding Pad Capable Not Pad Capable Total Rigs Total AC Legacy Grand Total Working Total 64 120 17 Util. 53% 14% Working Total 4 18 5 13 Util. 22% 38% Total 49% 30% WorkingTotal 6 34 5 65 Util. 18% 8% 172 85 Util. 43% 13% 65 127 51% 9 31 29% 47% 11 99 11% 257 33%

GRAPHIC

 


PACE®-X Rig Deployments & Rig Years 50 ---------------------------------------------------------------------45 +-----------------------------------------------------------------40 +-----------------------------------------------------------35 +-----------------------------------------------------30 +----------------------------------------------25 +----------------------------------------20 +---------------------------15 +---------------------10 +---------------------5 +--------------0 +---------- 1013 2013 3013 4013 1014 2014 3014 4014 1015 2015 3015 Lower 48 Deployments - lnt'l Deployments - cumulative Deployments - Cumulative Rig Years 1111, NABORS As of 9/30/15 9

GRAPHIC

 


3Q15 International Working Rigs As of 9/30/15 10 Total 119 PNG1 Russia5 Saudi44 Venezuela5 Kurdistan2 Kuwait2 Malaysia1 Mexico5 Oman4 Ecuador3 India3 Iraq1 Italy1 Kazakhstan2 Algeria10 Angola0 Argentina20 Colombia9 Congo1

GRAPHIC

 


Outlook and Summary 1111, NABORS 11

GRAPHIC

 


Strategic Focus Capitalize on the existing asset base > Differentiate the rig and service offerings > Enhance operational excellence > Improve financial flexibility > 12

GRAPHIC

 


Appendix 1111, NABORS 13

GRAPHIC

 


Rig Margins & Activity (1) Margin = gross margin per rig per day for the period. Gross margin is computed by subtracting direct costs from operating revenues for the period. 14 Drilling 4Q14 1Q15 2Q15 3Q15 Margin (1) Rig Yrs Margin (1) Rig Yrs Margin (1) Rig Yrs Margin (1) Rig Yrs U.S. Drilling$11,525212.2 Canada9,88936.9 International17,803121.2 $13,487167.6 9,92725.6 18,865130.1 $13,739119.5 7,7719.7 17,263127.1 $11,177103.0 6,34917.2 18,613121.3

GRAPHIC

 

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