OREANDA-NEWS. October 28, 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

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".

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

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)

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.

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

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.