NABORS INDUSTRIES LTD. 
By HAMILTON, Bermuda, April 22, 2014 /PRNewswire/ -- Nabors Industries Ltd. (NYSE:NBR) today reported its financial results for the first quarter of 2014. Adjusted income derived from operating activities was $109.0 million, compared to $143.1 million in the first quarter of 2013 and $159.6 million in the fourth quarter of 2013. Operating cash flow (EBITDA) was $391.2 million for the first quarter, compared to $412.5 million and $437.2 million, respectively, in the first and fourth quarters of last year. Net income from continuing operations was $49.0 million ($0.16 per diluted share), compared to $92.2 million ($0.31 per diluted share) in the first quarter of 2013 and $128.5 million ($0.42 per diluted share) in the fourth quarter of 2013. Operating revenues and earnings from unconsolidated affiliates for this quarter totaled $1.59 billion, compared to $1.54 billion in the comparable quarter of the prior year and $1.61 billion in the fourth quarter of 2013.
Tony Petrello, Nabors' Chairman, President & CEO, commented, "As expected, weather-induced interruptions in our Completion Services segment overshadowed what was otherwise relatively good performance by our various drilling operations. Seasonal increases in Canada and Alaska, along with higher third-party sales in Canrig, partially offset the sharp reduction in Completion results. Operating income for our international and U.S. Lower 48 operations decreased slightly below the strong fourth quarter level, but was better than expected on higher rig years. Notable developments during the quarter include securing four additional term contracts for new PACE-X(®) rigs and emerging indications of strengthening market fundamentals in virtually all of our business segments."
Drilling & Rig Services
Operating income in the Drilling & Rig Services business line was essentially flat sequentially at $155.5 million, while operating cash flow was slightly higher at $382.2 million. The quarter's results reflect higher seasonal contributions from Canada and Alaska, offset by lower results in U.S. Lower 48 land and International drilling operations.
International results were better than anticipated, although lower sequentially. The decrease is attributable to previously disclosed items related to unusual rig moving costs and the anticipated time between contracts for certain high-margin rig operations, including the dry-docking of the Company's large Arabian Gulf jackup. Second quarter results are expected to be in line with the first quarter, followed by progressively improving results starting in the third quarter. Contributions from the 21 new and upgraded rigs deploying through early 2015, the return to operations of the aforementioned rigs between contracts and the commencement of rate increases associated with several contract renewals will drive these improvements, all of which should develop fully by the middle of next year.
In North America, U.S. Drilling results improved slightly sequentially after adjusting for the $4.7 million early termination revenue received in the fourth quarter. Seasonally higher results in Alaska more than offset higher costs in the Lower 48, primarily attributable to first-quarter payroll taxes. The outlook for U.S. Drilling is increasingly positive in all regions of this segment. Activity in Alaska is expected to be less seasonal going forward, as the recently improved tax environment is leading to more rigs operating on a year-round basis. Deployment of a new large deepwater platform drilling rig should lead to significantly improved results in the Gulf of Mexico offshore operation, commencing in the fourth quarter. In the Lower 48 land operation, market activity and pricing appear to be strengthening, as higher than expected customer cash flows and moderating rig productivity are translating into incremental rig demand. This increasing demand is reflected in today's rig count of 199, which represents a 30-rig increase since the beginning of the fourth quarter, including eight which were previously receiving standby revenue but not working. Spot-market price increases now appear to be accelerating in selected areas. Canada posted seasonally-high quarterly results that were modestly below those of the same quarter last year. Although activity increased by four rigs, the average margin was lower due the mix shift to shallower rigs and a more competitive environment.
Rig Services' operating income was $8.7 million, representing a sizable improvement over last quarter's loss of $2.2 million. Essentially all of the improvement is attributable to Canrig, whose steadily increasing backlog is now the highest it has been in several years.
Completion & Production Services
The Completion & Production Services business line recorded an operating loss of $3.0 million, with operating cash flow of $53.4 million. The conclusion of a long-term contract and protracted downtime resulting from the series of winter storms that characterized the first quarter both contributed to these weak results. The weather impact was concentrated in Completion Services, which posted a $34 million loss, while Production Services saw only minimal effects. Weather aside, both elements of this business are seeing emerging evidence of improving market fundamentals. Similar to the Drilling & Rig Services business line, higher customer cash flows and moderating productivity are resulting in increased utilization, which should in turn exert upward pressure on pricing.
Production Services benefited from seasonally high activity in Canada, coupled with a modest sequential increase in both trucking and rig hours at flat rates. Second-quarter results are likely to be similar with the seasonal falloff in Canada, but should be followed by improving results. Demand for truck and rig services appears to be increasing. As a result, the Company anticipates higher pricing in light of the relatively high industry utilization and the diminishing supply of viable inventory that can be reactivated to meet the increased capacity requirements.
Completion Services results reflect not only the weather delays experienced across the Rocky Mountain, Bakken and Appalachia operations, but also the expiration of a significant long-term contract for two spreads in late fourth quarter. The weather in the northern regions has abated and first-quarter exit rates indicate a restoration of profitability in the second quarter. Industry fundamentals appear to be strengthening, evidenced by the emergence of higher underlying industry utilization in the fourth and first quarters. This increase in activity, in the face of moderating frac crew productivity, is leading to higher industry utilization and correspondingly higher maintenance expenditures. These factors are, in turn, exerting upward pressure on pricing. The first quarter's operational interruptions and producers' ensuing difficulty in meeting oil and gas production targets appear to be generating significant pent-up demand in the northern regions. Coupled with the increased demand associated with the rapid conversion to horizontal completions in West Texas, this may be a catalyst for improving industry returns.
Summary and Outlook
Petrello concluded, "Notwithstanding the weak performance of our Completion Services operations in the first quarter and the dampening impact the Canadian breakup usually exerts on our second quarter, I am increasingly confident in the near and intermediate-term outlook for all of our segments. My confidence is driven by the prospects for improvement in rates and utilization across most of our operations and the progress we are making on our numerous business improvement initiatives. Our PACE-X(®) rigs are deploying at a steady rate and continue to attract customer interest, while our multiple international deployments continue on schedule and on budget."
About Nabors
The Nabors companies own and operate approximately 493 land drilling rigs throughout the world and approximately 543 land workover and well servicing rigs in North America. Nabors' actively marketed offshore fleet consists of 39 platform rigs, 7 jackup units and 4 barge rigs in the United States and multiple international markets. In addition, Nabors is one of the largest providers of hydraulic fracturing, cementing, nitrogen and acid pressure pumping services with approximately 800,000 hydraulic horsepower currently in service. Nabors also manufactures top drives and drilling instrumentation systems and provides comprehensive oilfield hauling, engineering, civil construction, logistics, and facilities maintenance and project management services. Nabors participates in most of the significant oil and gas markets in the world.
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 projections 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.
The Company will host a conference call to review the quarterly results and forward business outlook tomorrow, Wednesday April 23, 2014, at 10:00 a.m. central time. Interested parties can access the call and supporting slides through a link provided on the www.nabors.com home page.
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
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended
------------------
March 31, December 31,
--------- ------------
(In thousands,
except per
share amounts) 2014 2013 2013
---- ---- ----
Revenues and
other income:
Operating
revenues $1,589,618 $1,535,478 $1,606,978
Earnings
(losses) from
unconsolidated
affiliates (2,445) 2,895 (1,588)
Investment
income (loss) 980 79,421 1,106
Total revenues
and other
income 1,588,153 1,617,794 1,606,496
--------- --------- ---------
Costs and other
deductions:
Direct costs 1,061,739 994,992 1,032,841
General and
administrative
expenses 134,266 130,878 135,307
Depreciation and
amortization 282,127 269,365 277,658
Interest expense 44,810 60,011 47,075
Losses (gains)
on sales and
disposals of
long-lived
assets and
other expense
(income), net 10,732
1,476 59,737
----- ------
Total costs and
other
deductions 1,524,418 1,514,983 1,503,613
--------- --------- ---------
Income (loss)
from continuing
operations
before income
taxes 63,735 102,811 102,883
------ ------- -------
Income tax
expense
(benefit) 14,008 9,854 (26,383)
Subsidiary
preferred stock
dividend 750 750 750
--- --- ---
Income (loss)
from continuing
operations, net
of tax 48,977 92,207 128,516
Income (loss)
from
discontinued
operations, net
of tax 1,515 7,011 23,113
----- ----- ------
Net income
(loss) 50,492 99,218 151,629
Less: Net
(income) loss
attributable to
noncontrolling
interest (573) (97) (1,026)
Net income
(loss)
attributable to
Nabors $49,919 $99,121 $150,603
------- ------- --------
Earnings
(losses) per
share: (1)
Basic from
continuing
operations $.16 $.31 $.43
Basic from
discontinued
operations .01 .03 .07
--- --- ---
Basic $.17 $.34 $.50
Diluted from
continuing
operations $.16 $.31 $.42
Diluted from
discontinued
operations - .02 .08
--- --- ---
Diluted $.16 $.33 $.50
Weighted-
average number
of common
shares
outstanding:
(1)
Basic 296,210 291,687 295,218
------- ------- -------
Diluted 299,050 294,170 297,746
------- ------- -------
Adjusted EBITDA
(2) $391,168 $412,503 $437,242
======== ======== ========
Adjusted income
(loss) derived
from operating
activities (3) $109,041 $143,138 $159,584
======== ======== ========
(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 from
the sum of Operating revenues
and Earnings (losses) from
unconsolidated affiliates.
There are limitations inherent
in using adjusted EBITDA as a
measure of overall
profitability because it
excludes significant expense
items. 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. These
amounts should not be used as a
substitute for the amounts
reported in accordance with
GAAP. To compensate for the
limitations in utilizing
adjusted EBITDA as an operating
measure, management also uses
GAAP measures of performance,
including income from
continuing operations and net
income, to evaluate
performance, but only with
respect to the Company as a
whole and not on a segment
basis. 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 and
depreciation and amortization
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".
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
(In
thousands,
except
ratios) 2014 2013
---- ----
ASSETS
Current
assets:
Cash
and
short-
term
investments $424,767 $507,133
Accounts
receivable,
net 1,454,368 1,399,543
Assets
held
for
sale 231,880 243,264
Other
current
assets 580,253 603,890
------- -------
Total
current
assets 2,691,268 2,753,830
Long-
term
investments
and
other
receivables 2,915 3,236
Property,
plant
and
equipment,
net 8,690,759 8,597,813
Goodwill 512,391 512,964
Investment
in
unconsolidated
affiliates 63,069 64,260
Other
long-
term
assets 226,671 227,708
Total
assets $12,187,073 $12,159,811
=========== ===========
LIABILITIES
AND
EQUITY
Current
liabilities:
Current
debt $5,296 $10,185
Other
current
liabilities 1,232,846 1,301,239
--------- ---------
Total
current
liabilities 1,238,142 1,311,424
Long-
term
debt 3,812,476 3,904,117
Other
long-
term
liabilities 1,095,998 893,905
--------- -------
Total
liabilities 6,146,616 6,109,446
Subsidiary
preferred
stock
(1) 69,188 69,188
Equity:
Shareholders'
equity 5,960,469 5,969,086
Noncontrolling
interest 10,800 12,091
------ ------
Total
equity 5,971,269 5,981,177
Total
liabilities
and
equity $12,187,073 $12,159,811
=========== ===========
(1) Represents subsidiary
preferred stock from
acquisition in September
2010. 75,000 shares of
such stock are
outstanding and pay
quarterly dividends at
an annual rate of 4%.
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
------------------
March 31, December 31,
--------- ------------
(In thousands,
except rig
activity) 2014 2013 2013
---- ---- ----
Reportable
segments:
Operating
revenues and
Earnings
(losses) from
unconsolidated
affiliates:
Drilling and Rig
Services:
U.S. $510,476 $484,773 $471,027
Canada 111,621 126,867 88,623
International 375,069 321,516 407,615
Rig Services (1) 143,726 134,231 132,502
------- ------- -------
Subtotal
Drilling and
Rig Services
(2) 1,140,892 1,067,387 1,099,767
Completion and
Production
Services:
Completion
Services 227,899 262,138 292,039
Production
Services 275,400 251,571 266,235
------- ------- -------
Subtotal
Completion and
Production
Services (3) 503,299 513,709 558,274
Other
reconciling
items (4) (57,018) (42,723) (52,651)
------- ------- -------
Total operating
revenues and
earnings
(losses) from
unconsolidated
affiliates $1,587,173 $1,538,373 $1,605,390
========== ========== ==========
Adjusted EBITDA:
(5)
Drilling and Rig
Services:
U.S. $187,637 $184,859 $187,426
Canada 40,119 45,531 29,159
International 137,991 106,514 157,720
Rig Services (1) 16,491 9,334 5,937
------ ----- -----
Subtotal
Drilling and
Rig Services
(2) 382,238 346,238 380,242
Completion and
Production
Services:
Completion
Services (6,654) 46,724 40,851
Production
Services 60,056 51,118 55,574
------ ------ ------
Subtotal
Completion and
Production
Services (3) 53,402 97,842 96,425
Other
reconciling
items (6) (44,472) (31,577) (39,425)
------- ------- -------
Total adjusted
EBITDA $391,168 $412,503 $437,242
======== ======== ========
Adjusted income
(loss) derived
from operating
activities:
(7)
Drilling and Rig
Services:
U.S. $72,494 $77,595 $75,378
Canada 26,160 30,518 14,536
International 48,119 21,469 69,612
Rig Services (1) 8,728 1,287 (2,179)
----- ----- ------
Subtotal
Drilling and
Rig Services
(2) 155,501 130,869 157,347
Completion and
Production
Services:
Completion
Services (33,635) 17,756 14,072
Production
Services 30,591 26,014 26,736
------ ------ ------
Subtotal
Completion and
Production
Services (3) (3,044) 43,770 40,808
Other
reconciling
items (6) (43,416) (31,501) (38,571)
------- ------- -------
Total adjusted
income (loss)
derived from
operating
activities $109,041 $143,138 $159,584
======== ======== ========
Rig activity:
Rig years: (8)
U.S. 206.6 189.6 198.4
Canada 43.8 40.0 32.5
International
(9) 129.8 122.7 124.6
Total rig years 380.2 352.3 355.5
===== ===== =====
Rig hours: (10)
U.S. Production
Services 209,982 212,298 205,456
Canada
Production
Services 41,540 48,027 36,455
Total rig hours 251,522 260,325 241,911
======= ======= =======
(1) Includes our drilling technology
and top drive manufacturing,
directional drilling, rig
instrumentation and software
services. These services
represent our other companies
that are not aggregated into a
reportable operating segment.
(2) Includes earnings (losses), net
from unconsolidated affiliates,
accounted for using the equity
method, of ($2.5) million, $2.8
million and ($1.4) million for
the three months ended March
31, 2014 and 2013 and December
31, 2013, respectively.
(3) Includes earnings (losses), net
from unconsolidated affiliates,
accounted for using the equity
method, of $.1 million, $.1
million and ($.2) million for
the three months ended March
31, 2014 and 2013 and December
31, 2013, respectively.
(4) Represents the elimination of
inter-segment transactions.
(5) Adjusted EBITDA is computed by
subtracting the sum of direct
costs and general and
administrative expenses from
the sum of Operating revenues
and Earnings (losses) from
unconsolidated affiliates.
There are limitations inherent
in using adjusted EBITDA as a
measure of overall
profitability because it
excludes significant expense
items. 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. These
amounts should not be used as a
substitute for the amounts
reported in accordance with
GAAP. To compensate for the
limitations in utilizing
adjusted EBITDA as an operating
measure, management also uses
GAAP measures of performance,
including income from
continuing operations and net
income, to evaluate
performance, but only with
respect to the Company as a
whole and not on a segment
basis. 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".
(6) Represents the elimination of
inter-segment transactions and
unallocated corporate expenses.
(7) Adjusted income (loss) derived
from operating activities is
computed by subtracting the sum
of direct costs, general and
administrative expenses and
depreciation and amortization
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".
(8) 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.
(9) International rig years includes
our equivalent percentage
ownership of rigs owned by
unconsolidated affiliates,
which totaled 2.5 years during
each of the three months ended
March 31, 2014 and 2013 and
December 31, 2013.
(10) Rig hours represents the number
of hours that our well-
servicing rig fleet operated
during the period.
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(Unaudited)
Three Months Ended
------------------
March 31, December 31,
--------- ------------
(In thousands) 2014 2013 2013
---- ---- ----
Adjusted EBITDA $391,168 $412,503 $437,242
Less: Depreciation and amortization 282,127 269,365 277,658
Adjusted income (loss) derived from operating activities 109,041 143,138 159,584
------- ------- -------
Interest expense (44,810) (60,011) (47,075)
Investment income (loss) 980 79,421 1,106
Gains (losses) on sales and disposals of long-lived assets and other income (expense), net (1,476) (10,732)
(59,737)
-------
Income (loss) from continuing operations before income taxes $63,735 $102,811 $102,883
======= ======== ========
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
------------------
March 31, December 31,
--------- ------------
(In thousands,
except per share
amounts) 2014 2013 2013
---- ---- ----
Net income (loss)
attributable to
Nabors
(numerator):
Income (loss)
from continuing
operations, net
of tax $48,977 $92,207 $128,516
Less: net
(income) loss
attributable to
noncontrolling
interest (573) (97) (1,026)
Less: earnings
allocated to
unvested
shareholders (733) (814) (1,948)
---- ---- ------
Adjusted income
(loss) from
continuing
operations -
basic and
diluted $47,671 $91,296 $125,542
Income (loss)
from
discontinued
operations, net
of tax 1,515 7,011 23,113
$49,186 $98,307 $148,655
------- ------- --------
Earnings (losses)
per share:
Basic from
continuing
operations $.16 $.31 $.43
Basic from
discontinued
operations .01 .03 .07
Total Basic $.17 $.34 $.50
---- ---- ----
Diluted from
continuing
operations $.16 $.31 $.42
Diluted from
discontinued
operations - .02 .08
Total Diluted $.16 $.33 $.50
---- ---- ----
Shares
(denominator):
Weighted-average
number of shares
outstanding-
basic 296,210 291,687 295,218
Net effect of
dilutive stock
options,
warrants and
restricted stock
awards based on
the if-
converted method 2,528
2,840 2,483
----- -----
Weighted-average
number of shares
outstanding -
diluted 299,050 294,170 297,746
------- ------- -------
For all periods presented,
the computation of
diluted earnings (losses)
per share excluded
outstanding stock options
and warrants 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 and
warrants that were
excluded from diluted
earnings (losses) per
share that would have
potentially diluted
earnings (losses) per
share were 7,853,509 and
12,452,263 shares during
the three months ended
March 31, 2014 and 2013,
respectively; and
10,908,160 shares during
the three months ended
December 31, 2013. In any
period during which the
average market price of
Nabors' common shares
exceeds the exercise
prices of these stock
options and warrants,
such stock options and
warrants are included in
our diluted earnings
(losses) per share
computation using the if-
converted method of
accounting. Restricted
stock is included in our
basic and diluted
earnings (losses) per
share computation using
the two-class method of
accounting in all periods
because such stock is
considered a
participating security.
SOURCE Nabors Industries Ltd.
