Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nabors Industries Ltd (NBR, Financial) reported an adjusted EBITDA of $222 million for the third quarter, aligning with expectations.
- The acquisition of Parker Wellbore is expected to accelerate Nabors' strategy, particularly in the drilling solutions segment, and is anticipated to be beneficial for shareholders.
- International markets remain a strong growth area for Nabors, with several rig deployments expected by the end of 2024 and additional opportunities in 2025.
- The company's drilling solutions and rig technologies segments generated a combined EBITDA of over $40 million, with an increased contribution to the company's consolidated EBITDA.
- Nabors' focus on technology and innovation, including automation and performance software, is driving growth and improving margins, particularly in international markets.
Negative Points
- The US Lower 48 industry rig count decreased by approximately 3% sequentially, indicating a challenging domestic market environment.
- Three rigs in Saudi Arabia were suspended for a year, impacting operations, although these were lower-margin rigs.
- The company's free cash flow was impacted by significant capital expenditures, particularly related to the SANAD newbuild program.
- Revenue from the US drilling segment decreased slightly, reflecting a challenging pricing environment and contract rollovers.
- Rig technologies segment experienced a decline in EBITDA due to lower sales of energy transition products and spare parts in the US.
Q & A Highlights
Q: Tony, could you discuss the recent acquisition of Parker Wellbore and its integration with Nabors Drilling Solutions (NDS)?
A: Anthony Petrello, CEO: The acquisition of Parker Wellbore aligns well with our existing operations, particularly in Alaska and offshore maintenance. It enhances our well construction services, notably casing running, in key markets like the US, Saudi Arabia, and the UAE. We aim to integrate Parker's operations with our automation model to improve margins. Parker's Quail Tools is a strong addition, especially with the trend towards longer laterals. The acquisition is expected to be capital-light, with high free cash flow conversion, improving our financial metrics.
Q: How do you view the impact of efficiency gains on rig demand in 2025, given the significant reduction in well cycle times?
A: Anthony Petrello, CEO: While efficiency gains are notable, we are approaching diminishing returns with some operators. The focus is now on flat time reduction and leveraging longer laterals to enhance well economics. Our advanced rigs and downhole tools aim to improve geosteering and completion design, adding value to well construction and potentially increasing rig demand.
Q: Can you comment on the pricing and margin trends in the international drilling space, particularly in Saudi Arabia?
A: Anthony Petrello, CEO: Despite rig suspensions in Saudi Arabia, Nabors is well-positioned with most rigs on gas-directed wells and long-term contracts. The SANAD newbuild program continues without changes in rates or cadence. Internationally, we see strong demand across regions like Latin America, MENA, and Asia, with opportunities to optimize our asset base and improve pricing.
Q: What are your expectations for international rig margins through 2025, considering new SANAD rigs and other deployments?
A: William Restrepo, CFO: We achieved $17,000 daily rig margins in Q3, ahead of schedule. While Q4 margins are expected to remain stable, we anticipate potential increases in 2025 as more SANAD rigs are deployed and international opportunities are realized. The mix of high-performing rigs and strategic deployments should support margin growth.
Q: How does the international supply-demand balance compare to the US Lower 48 market, and what are your capital expenditure plans for 2025?
A: Anthony Petrello, CEO: Internationally, we see diverse opportunities across Latin America, MENA, and Asia, with a focus on optimizing existing assets. The international market is more dynamic compared to the flat US Lower 48 market. For 2025, we expect higher CapEx due to increased SANAD deployments and maintenance needs, but we aim to manage this within our cash flow capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
