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8-K
NABORS INDUSTRIES LTD filed this Form 8-K on 02/20/2013
Entire Document
 

 

 

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) February 15, 2013

 

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 February 19, 2013, we issued a press release announcing our results of operations for the fourth quarter and full year 2012.  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 “non-GAAP” financial measures under Regulation G.  We presented our adjusted income (loss) derived from operating activities for all periods presented in the release.  The components of adjusted income (loss) derived from operating activities are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  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 U.S. oil and gas joint venture 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 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 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 adjusted income (loss) derived from operating activities, and because we believe this financial measure is an accurate reflection of our ongoing profitability.  We included the adjusted net income (loss) attributable to Nabors because we believe the non-GAAP financial measures to be more indicative of our ongoing operating results and financial condition.

 

Item 7.01                                           Regulation FD Disclosure.

 

We previously disclosed that on July 5, 2007, we received an inquiry from the U.S. Department of Justice relating to its investigation of one of our vendors and compliance with the Foreign Corrupt Practices Act. The inquiry related to transactions with and involving Panalpina, which provided freight forwarding and customs clearance services to some of our affiliates.  In 2012, the SEC advised us that it had concluded its review of the matter and did not intend to recommend any enforcement action against us. On February 15, 2013, the Department of Justice likewise advised us that it has concluded its inquiry, also without recommending any enforcement action against us.

 

Item 8.01.                                        Other Events.

 

On February 20, 2013, 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.

 

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Item 9.01              Financial Statements and Exhibits.

 

(d)  Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

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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: February 20, 2013

By:

/s/ Mark D. Andrews

 

 

Mark D. Andrews

 

 

Corporate Secretary

 

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EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release

99.2

 

Investor Information

 

4


Exhibit 99.1

 

NEWS RELEASE

 

NABORS POSTS 4Q2012 EPS OF $0.44 PER DILUTED SHARE FROM CONTINUING OPERATIONS, INCLUDING NET GAINS FROM ASSET DISPOSITIONS, HIGHER INVESTMENT INCOME & FAVORABLE TAX RATE

 

·      Company Makes Significant Progress Against Strategic Initiatives in 2012

 

·      Strong Fourth Quarter Cash Flow Yields $458 Million Additional Net Debt Reduction for Total Net Debt Reduction of $678 Million Over Last Three Quarters

 

·      Nine New Multi-Year Contracts Signed for Innovative PACE®-X Rigs

 

HAMILTON, Bermuda, February 19, 2013 — Nabors Industries Ltd. (NYSE:NBR) today announced its results for the fourth quarter and full year 2012.  The Company’s net income from continuing operations was $129.3 million ($0.44 per diluted share) in the fourth quarter and $239.1 million ($0.82 per diluted share) for the full year.  For the comparable periods of the prior year, the Company reported net income from continuing operations of $89.5 million ($0.30 per diluted share) for the fourth quarter and $342.2 million ($1.17 per diluted share) for the full year.  The current quarter’s adjusted income derived from operating activities was $149.8 million, bringing the total for 2012 to $918.6 million.  This compares to $269.3 million for the corresponding quarter of 2011 and $867.4 million for all of 2011.  Revenues for 2012 were $1.6 billion for the quarter and $7.0 billion for the full year.  Income from discontinued operations for the fourth quarter was a net loss of $101.1 million ($0.35 per diluted share), reflecting further impairments and reserves with respect to the Company’s oil and gas operations in British Columbia.

 

Tony Petrello, Nabors’ Chairman and CEO, commented, “As we anticipated, the fourth quarter reflected weaker market conditions, including a near suspension of pressure pumping work in late December that continued into early January.  Nonetheless, we made significant progress toward our strategic objectives, namely streamlining our business, achieving a higher level of operational excellence and enhancing the flexibility of our financial position.   Although it contained formidable challenges, 2012 represented the highest levels of revenue, gross margin and EBITDA in the Company’s history, while more judicious capital deployment yielded strong free cash flow.

 

“The consolidation of our U.S. Well Servicing and Pressure Pumping operations continues and is beginning to show meaningful cost and performance improvements, although obscured by the weaker market environment.  A combination of strong operating cash flow, lower capital expenditures, additional asset sales and improvements in working capital management enabled a $458 million reduction in net debt in the fourth quarter, adding to the $160 million reduction we achieved in the third quarter.  This enhanced financial flexibility facilitates our ability to make capital investments in new rigs and technologies and pursue other strategic opportunities.  For example, the innovative features of our new PACE®–X rig continue to gain market traction, as evidenced by the nine additional long-term contracts we secured in the quarter with an average duration of 2.7 years and average revenues in excess of $29,000 per day.  We now have 21 long-term contract awards in the last four quarters in our U.S. land operations alone, 17 of which

 

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are for our new generation PACE®-X rigs.  We are pleased with the customer reaction to the innovative features of this new rig design and are engaged in discussions regarding more awards.”

 

Fourth quarter income per share of $0.44 benefited from net gains on asset dispositions, higher investment income and a favorable tax rate.  Results also included an operating income charge of $17.7 million due to the establishment of reserves with respect to a customer bankruptcy and lower expected margins on a construction project in our U.S. Offshore operations.  Those charges were essentially offset by $16.3 million in early contract termination payments during the quarter that are attributable to future periods.  Net gains on asset dispositions were $17.2 million (or $0.04 per share) and resulted from $160 million in gains on asset sales and $143 million in asset retirements and impairments.  The higher than usual investment income reflected non-cash mark-to-market increases in certain securities, principally a portion of the Company’s interest in Honghua Group, a Chinese rig manufacturer.  The quarter’s results also reflect a tax adjustment to bring the full year normalized tax rate to 25%, resulting in a fourth quarter effective tax rate of 3%, for an EPS impact of approximately $0.10 per diluted share in the quarter.

 

Drilling & Rig Services

 

Sequential operating income for the Drilling & Rig Services business was $138.9 million, compared to $184.6 million posted in the third quarter.  Operationally, results were lower in US Lower 48 land drilling and Other Rig Services, driven by a lower U.S. land rig count and seasonal bottoms in the Alaska construction and logistics businesses.  This was partially offset by increases in Canada, International and Offshore - adjusting for International’s third quarter early contract termination payments and the fourth quarter U.S. Offshore charges.  The Company averaged 18.5 fewer rigs working during the quarter at average margins of $12,140 per rig day, which is $211 lower than the third quarter.

 

In the Company’s U.S. Lower 48 operations, operating income was $94.7 million, approximately $20.2 million lower than the third quarter with 21 fewer rigs working, the impact of which was partially offset by a $333 increase in average margins totaling $12,363 per rig day.  These numbers include $1,028 per rig day in early termination payments attributable to other periods.  For the full year, this unit recorded $467.7 million in operating income, compared to $414.3 million for 2011.

 

Mr. Petrello continued, “As we have previously discussed, our rig count has declined more sharply than the industry for reasons we believe are circumstantial and not structural.  Coincident with weakening commodity prices and operators’ increasing reluctance to renew contracts at durations longer than six months, we became increasingly vulnerable as 118 of our long-term contracts matured in 2012.  In particular, several major customers with whom we enjoyed an outsized market share, sharply curtailed spending, four of which accounted for 41 of our 68 rig decrease. Twelve of these rigs received early termination compensation, with the balance released as long-term contracts matured.  Among these four customers, the one that released the most rigs is also the largest subscriber to our new PACE®-X rig contracts, affirming their satisfaction with our performance.  Further, industry rig counts do not reflect the $75 million in lump sum termination and standby payments, representing the economic equivalent of 25 working rigs, that we received in the last three quarters of 2012.  Our rig count recently bottomed and has

 

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begun to increase, which we expect to continue over the rest of this quarter, although we remain cautious in predicting the timing and magnitude of activity improvement.  The performance of our fleet continues to receive recognition from our customer base as we recently earned rig of the year honors for a large Bakken operator and have recently set records in two Texas fields.

 

“Our optimism for the longer-term future is bolstered by this performance, coupled with strong and growing customer acceptance of our innovative PACE®-X rig.  We anticipate more X rig awards in the near term.  We are also the leader in the rapidly emerging market for pad-capable rigs, particularly walking rigs, which overcome the inherent limitations of skid rigs.  Including walking systems currently on order, our U.S. Lower 48 fleet comprises 45% of the industry’s pad-capable rigs and 50% of the walking rigs.

 

“Nonetheless, we expect the first quarter to show a marked decline in income given the current low rig count and depressed spot market rates, largely as a consequence of numerous speculative rigs entering the market at spot rates with minimal durations.  Our availability of highly capable rigs and the short-term bias of recent contract renewals give us good leverage in the eventual upturn.

 

“We consolidated our U.S. Offshore and Alaska drilling operations into U.S. Land drilling at the beginning of the fourth quarter, allowing us to consolidate overhead, capitalize on the engineering excellence of all three organizations and improve labor utilization and efficiency.

 

“Our U.S. Offshore operations recorded a loss of $14.3 million, which included the aforementioned $17.7 million reversal of previously accrued income in light of a customer bankruptcy and lower expected margins on a platform construction project.  Absent these charges, operational rig activity increased modestly and average margins improved by $6,500 per rig day to $15,115 as hurricane season wound down and consolidation savings began to be realized.  We expect activity and margins to continue to improve over the next two quarters with an improving market and lower costs.

 

“Operating income in Alaska reached its seasonal low at $2.2 million, down from $4.0 million in the third quarter.  For the full year, operating income was $42.5 million, which compared favorably to the $27.7 million achieved by this unit in 2011.  Alaska has become increasingly seasonal with the progressive tax structure inhibiting year-round activity in the large legacy fields.  The fourth quarter is now the seasonal low point, as it lies between the end of the summer drilling season and the first quarter commencement of the winter exploratory season.  We expect to have a strong first quarter, although lower than last year as permitting obstacles have postponed at least one significant project into next year.

 

“Operating income in our international operations was essentially flat at $23 million, after normalizing results for the portion of a third quarter termination payment attributable to future periods.  For the full year, income of $91.2 million was down compared to $123.8 million for 2011.  However, it is noteworthy to point out that cash from operations in this unit increased while capital expenditures declined significantly, resulting in an overall improvement in year over year cash generation of more than $400 million, exemplifying our more stringent capital allocation criteria.

 

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“The near-term outlook remains challenging, but we expect to see improving results beginning in the second half of the year, and the longer-term future looks increasingly bright.  Higher costs in certain countries are beginning to abate as contracts renew at increased rates with high quality rigs in increasingly tighter supply.  We have six rigs in Saudi that will undergo deferred modifications in the first two quarters, and Yemen and Iraq continue to drag our results.  We also have a large project winding down in Latin America where we expect to incur some down time before new contracts commence.  On the positive side, we recently restarted a jackup in the UAE and renewed another at an increased rate in Saudi Arabia for an additional three years.  These developments, the completion of negotiations on other projects, and the gradual improvement in the aforementioned cost issues, support our expectation of a second half improvement.

 

“In Canada we saw a $5.2 million sequential increase in operating income at $28.1 million.  For the full year, this unit achieved a slight improvement in income of $96.5 million, compared to $94.6 million in 2011.  While it appears the first quarter will represent a significant increase over the fourth quarter, we expect it to be significantly below the first quarter of 2012, indicative of the customer spending constraints that characterize this market.  Nonetheless, the nature of the remaining market favors our fleet mix and is supported by the quality of both our drilling and workover operations.  We deployed a new slant workover rig to the oilsands and expect soon to deploy a new 1,500 horsepower walking rig, both on term contracts for key customers.

 

“Our other rig services were down sequentially at $4.8 million with weaker results in three of the four units that comprise this segment.  Canrig was moderately down, with reduced service and rental income as a result of the anemic rig count and fewer capital equipment shipments due to slower new rig construction.  Ryan posted a small improvement, while our Alaska construction and logistics operations both posted net losses; these accounted for nearly 80% of this segment’s sequential decrease with their activity at seasonal troughs.  These operations should rebound sharply in the first quarter as they move into their seasonally high quarters.

 

Completion & Production Services

 

“During the quarter, operating income in our Completion & Production Services business line was $50.7 million, down sharply from the $80.0 million achieved in the third quarter.  The majority of this decrease came from lower stage counts in pressure pumping as our term contract customers compressed activity to contractually required minimums combined with a larger than usual drop off during the holidays.  Commencing with the U.S. Thanksgiving holiday, depleting budgets led to a more severe seasonal contraction than past years, which became even worse near the end of the year.  Activity in well servicing and fluids services also dropped sharply commencing in mid-November, exacerbated by some customer-specific work suspensions in December.  Similarly in pressure pumping, we operated only one of our 16 active stimulation spreads during the last two weeks of December, as contractual minimums had been met and spot market, customers suspended operations for the holidays.  Despite the weakening

 

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market, full year operating income was $292.2 million compared to $303.9 million in 2011, with increases in Production Services more than offset by declines in Completion Services.

 

“Operating income attributable to the Production Services group was $20.4 million, down from the $32.8 million realized in the third quarter.  This was a product of activity curtailments experienced in the last six weeks of the quarter, amplified by the limited ability to reduce costs in such short-term situations.  Truck hours were up seven percent, while rig hours dropped by the same percentage.  Average hourly rig rates improved modestly as truck rates moved slightly lower, both most likely attributable to regional mix.  For the full year, operating income was up significantly at $103.7 million, compared to $74.7 million for the prior year, indicative of the longer-term trends in this business.  We anticipate further improvement in 2013 fueled by the continuing growth in the population of maintenance-intensive oil wells and increasing demand for fluid services.  Activity recovered significantly in mid-January, but we still expect first quarter improvement to be limited by the usual seasonal constraints, especially with our growing northern presence.

 

“In Completion Services, operating income declined to $30.3 million compared to the $47.2 million this unit achieved in the third quarter.  This was primarily due to reduced volume and exacerbated by the same limited ability to curtail costs during short-term interruptions that we occasionally experience in Production Services.  For the full year, operating income was $188.5 million compared to $229.1 million in 2011.  This business continues to be weighed down by an overhang of capacity that is keeping rates and utilization suppressed.  Nonetheless, we continue to focus on improving operational and logistical efficiency, reducing operating costs, and lowering SG&A through improved systems and consolidation, although the financial impact is obscured by the challenging market.  Our operational performance is at a good level and improving as evidenced by our success in rolling over maturing contracts and bundling other related services with numerous operators.  We anticipate a further decrease in first quarter income with seasonal weakness amplified by our concentration in the most susceptible areas.  The balance of 2013 is difficult to forecast for this segment, but we will continue to pursue efficiency gains.  Although many of our long-term contracts are expiring, our success to date in extending these into exclusive or minimum volume term agreements leads us to believe we can maintain a sufficient level of utilization.

 

Summary

 

“Our financial position remains strong and has continued to improve as we remain focused on generating free cash flow through a combination of strong operational execution, working capital management, judicious capital allocation and asset sales where prudent.  At the same time, we will continue to invest in our core markets to obtain, regain or maintain leading positions in market share and technical innovation and pursue strategic opportunities within our core operations where the risk / reward balance warrants.

 

“Despite the near-term challenges that several of our markets present, we are increasingly optimistic concerning the intermediate and longer-term future of all of our operations.  Our previously announced strategic plan of enhancing balance sheet flexibility, achieving a higher standard of operational excellence,

 

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accelerating technology innovation and adoption, and streamlining our business is beginning to yield results.  Our progress has been inhibited by the obstacles of the weak market conditions we face in many of our businesses and compressed financial market multiples; conversely, the diminishing drag of previous commitments is beginning to facilitate progress.  This is evident in the achievements of the last two quarters.  Our success with the PACE®-X rig reflects our efforts to make Nabors the global provider of choice in reducing well costs, especially in shale provinces.”

 

The Nabors companies actively market approximately 474 land drilling rigs throughout the world and approximately 548 land workover and well servicing rigs in North America.  Nabors’ actively marketed offshore fleet consists of 36 platform rigs, 12 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 805,000 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.

 

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

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except per share amounts)

 

2012

 

2011

 

2012

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

1,595,614

 

$

1,734,637

 

$

1,766,419

 

$

6,989,573

 

$

6,060,351

 

Earnings (losses) from unconsolidated affiliates

 

1,193

 

(2,658

)

(99,527

)

(301,320

)

56,647

 

Investment income (loss)

 

30,293

 

7,908

 

7,224

 

63,137

 

19,940

 

Total revenues and other income

 

1,627,100

 

1,739,887

 

1,674,116

 

6,751,390

 

6,136,938

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

1,039,050

 

1,087,994

 

1,136,198

 

4,483,320

 

3,775,964

 

General and administrative expenses

 

130,723

 

131,540

 

131,887

 

532,568

 

489,892

 

Depreciation and amortization

 

277,283

 

239,757

 

269,597

 

1,055,517

 

924,094

 

Interest expense

 

61,835

 

60,852

 

63,604

 

251,552

 

256,633

 

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

 

(158,347

)

5,614

 

10,263

 

(136,510

)

4,514

 

Impairments and other charges

 

142,757

 

100,000

 

 

290,260

 

198,072

 

Total costs and other deductions

 

1,493,301

 

1,625,757

 

1,611,549

 

6,476,707

 

5,649,169

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

133,799

 

114,130

 

62,567

 

274,683

 

487,769

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

3,777

 

23,845

 

(4,001

)

32,628

 

142,605

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsidiary preferred stock dividend

 

750

 

750

 

750

 

3,000

 

3,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

129,272

 

89,535

 

65,818

 

239,055

 

342,164

 

Income (loss) from discontinued operations, net of tax

 

(101,121

)

(193,985

)

10,826

 

(74,400

)

(97,440

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

28,151

 

(104,450

)

76,644

 

164,655

 

244,724

 

Less: Net (income) loss attributable to noncontrolling interest

 

(1,074

)

(1,400

)

(988

)

(621

)

(1,045

)

Net income (loss) attributable to Nabors

 

$

27,077

 

$

(105,850

)

$

75,656

 

$

164,034

 

$

243,679

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share: (1)

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

.44

 

$

.31

 

$

.22

 

$

.82

 

$

1.19

 

Basic from discontinued operations

 

(.35

)

(.68

)

.04

 

(.25

)

(.34

)

Basic

 

$

.09

 

$

(.37

)

$

.26

 

$

.57

 

$

.85

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

.44

 

$

.30

 

$

.22

 

$

.82

 

$

1.17

 

Diluted from discontinued operations

 

(.35

)

(.66

)

.04

 

(.26

)

(.34

)

Diluted

 

$

.09

 

$

(.36

)

$

.26

 

$

.56

 

$

.83

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Basic

 

290,394

 

287,561

 

290,367

 

289,965

 

287,118

 

Diluted

 

292,421

 

290,964

 

292,501

 

292,323

 

292,484

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) derived from operating activities from continuing operations (2)

 

$

149,751

 

$

269,288

 

$

228,015

 

$

918,649

 

$

867,363

 

 


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

 

(2)                                 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 the U.S. oil and gas joint venture 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 “Segment Reporting”.

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

(Unaudited)

 

 

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except ratios)

 

2012

 

2012

 

2011

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and short-term investments

 

$

778,204

 

$

619,563

 

$

539,489

 

Accounts receivable, net

 

1,382,623

 

1,529,232

 

1,576,555

 

Assets held for sale

 

383,857

 

404,234

 

401,500

 

Other current assets

 

588,173

 

580,620

 

570,770

 

Total current assets

 

3,132,857

 

3,133,649

 

3,088,314

 

Long-term investments and other receivables

 

4,269

 

5,301

 

11,124

 

Property, plant and equipment, net

 

8,712,088

 

8,894,084

 

8,629,946

 

Goodwill

 

472,326

 

472,462

 

501,258

 

Investment in unconsolidated affiliates

 

61,690

 

70,172

 

371,021

 

Other long-term assets

 

272,792

 

348,893

 

310,477

 

Total assets

 

$

12,656,022

 

$

12,924,561

 

$

12,912,140

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

364

 

$

389

 

$

275,326

 

Other current liabilities

 

1,132,018

 

1,134,277

 

1,527,236

 

Total current liabilities

 

1,132,382

 

1,134,666

 

1,802,562

 

Long-term debt

 

4,379,336

 

4,678,896

 

4,348,490

 

Other long-term liabilities

 

1,117,999

 

1,185,687

 

1,090,683

 

Total liabilities

 

6,629,717

 

6,999,249

 

7,241,735

 

 

 

 

 

 

 

 

 

Subsidiary preferred stock (1)

 

69,188

 

69,188

 

69,188

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Shareholders’ equity

 

5,944,929

 

5,843,880

 

5,587,815

 

Noncontrolling interest

 

12,188

 

12,244

 

13,402

 

Total equity

 

5,957,117

 

5,856,124

 

5,601,217

 

Total liabilities and equity

 

$

12,656,022

 

$

12,924,561

 

$

12,912,140

 

 


(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%.

 

8



 

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

 

Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except rig activity)

 

2012

 

2011

 

2012

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Reportable segments:

 

 

 

 

 

 

 

 

 

 

 

Operating revenues and Earnings (losses) from unconsolidated affiliates from continuing operations: (1)

 

 

 

 

 

 

 

 

 

 

 

Drilling and Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S. Lower 48 Land Drilling

 

$

408,429

 

$

484,173

 

$

461,860

 

$

1,860,357

 

$

1,698,620

 

U.S. Offshore

 

61,218

 

53,920

 

66,675

 

268,986

 

170,727

 

Alaska

 

25,507

 

29,216

 

27,249

 

147,465

 

129,894

 

Canada

 

152,147

 

168,750

 

135,786

 

572,616

 

574,754

 

International

 

324,728

 

295,067

 

329,245

 

1,265,060

 

1,104,461

 

Other Rig Services (2)

 

180,467

 

211,427

 

188,694

 

839,533

 

674,206

 

Subtotal Drilling and Rig Services (3)

 

1,152,496

 

1,242,553

 

1,209,509

 

4,954,017

 

4,352,662

 

Completion and Production Services:

 

 

 

 

 

 

 

 

 

 

 

U.S. Production Services

 

211,928

 

197,471

 

222,034

 

857,668

 

701,223

 

Completion Services

 

295,827

 

369,794

 

381,241

 

1,462,767

 

1,237,306

 

Subtotal Completion and Production Services (4)

 

507,755

 

567,265

 

603,275

 

2,320,435

 

1,938,529

 

Other reconciling items (5)

 

(63,444

)

(77,839

)

(145,892

)

(586,199

)

(174,193

)

Total

 

$

1,596,807

 

$

1,731,979

 

$

1,666,892

 

$

6,688,253

 

$

6,116,998

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) derived from operating activities from continuing operations: (1) (6)

 

 

 

 

 

 

 

 

 

 

 

Drilling and Rig Services:

 

 

 

 

 

 

 

 

 

 

 

U.S. Lower 48 Land Drilling

 

$

94,719

 

$

130,114

 

$

114,884

 

$

467,716

 

$

414,317

 

U.S. Offshore

 

(14,311

)

3,422

 

(3,650

)

(305

)

843

 

Alaska

 

2,195

 

5,343

 

3,973

 

42,483

 

27,671

 

Canada

 

28,078

 

36,553

 

22,889

 

96,536

 

94,637

 

International

 

23,388

 

23,450

 

30,299

 

91,226

 

123,813

 

Other Rig Services (2)

 

4,829

 

13,152

 

16,207

 

79,061

 

55,617

 

Subtotal Drilling and Rig Services (3)

 

138,898

 

212,034

 

184,602

 

776,717

 

716,898

 

Completion and Production Services:

 

 

 

 

 

 

 

 

 

 

 

U.S. Production Services

 

20,360

 

24,237

 

32,825

 

103,659

 

74,725

 

Completion Services

 

30,296

 

76,470

 

47,218

 

188,518

 

229,125

 

Subtotal Completion and Production Services (4)

 

50,656

 

100,707

 

80,043

 

292,177

 

303,850

 

Other reconciling items (7)

 

(39,803

)

(43,453

)

(36,630

)

(150,245

)

(153,385

)

Total adjusted income (loss) derived from operating activities

 

$

149,751

 

$

269,288

 

$

228,015

 

$

918,649

 

$

867,363

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. oil and gas joint venture earnings (losses)

 

 

3,400

 

(98,805

)

(301,801

)

59,685

 

Interest expense

 

(61,835

)

(60,852

)

(63,604

)

(251,552

)

(256,633

)

Investment income (loss)

 

30,293

 

7,908

 

7,224

 

63,137

 

19,940

 

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

 

158,347

 

(5,614

)

(10,263

)

136,510

 

(4,514

)

Impairments and other charges

 

(142,757

)

(100,000

)

 

(290,260

)

(198,072

)

Income (loss) from continuing operations before income taxes

 

$

133,799

 

$

114,130

 

$

62,567

 

$

274,683

 

$

487,769

 

 

 

 

 

 

 

 

 

 

 

 

 

Rig activity:

 

 

 

 

 

 

 

 

 

 

 

Rig years: (8)

 

 

 

 

 

 

 

 

 

 

 

U.S. Lower 48 Land Drilling

 

172.7

 

216.7

 

193.8

 

200.7

 

200.2

 

U.S. Offshore

 

12.4

 

10.0

 

12.8

 

12.8

 

9.6

 

Alaska

 

5.2

 

5.0

 

4.6

 

5.6

 

4.9

 

Canada

 

36.3

 

45.2

 

34.0

 

34.8

 

39.8

 

International (9)

 

119.3

 

113.2

 

119.2

 

119.3

 

105.3

 

Total rig years

 

345.9

 

390.1

 

364.4

 

373.2

 

359.8

 

Rig hours: (10)

 

 

 

 

 

 

 

 

 

 

 

U.S. Production Services

 

202,368

 

202,816

 

217,675

 

853,373

 

791,956

 

Canada Production Services

 

44,582

 

52,712

 

43,849

 

181,185

 

184,908

 

Total rig hours

 

246,950

 

255,528

 

261,524

 

1,034,558

 

976,864

 

 

9



 


(1)                   All periods present the operating activities of our wholly owned oil and gas businesses in the United States, Canada and Colombia, our equity interests in joint ventures in Canada and Colombia and our aircraft logistics operations in Canada as discontinued operations.

 

(2)                   Includes our drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software, and construction services. These services represent our other companies that are not aggregated into a reportable operating segment.

 

(3)                   Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $.7 million, $(6.1) million and $(.7) million for the three months ended December 31,  2012 and 2011 and September 30, 2012, respectively, and $(3.1) million for the year ended December 31, 2011.

 

(4)                   Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $.5 million for the three months and year ended December 31, 2012.

 

(5)                   Represents the elimination of inter-segment transactions and earnings (losses), net from the U.S. unconsolidated oil and gas joint venture, accounted for using the equity method until sold in December 2012, of $3.4 million and $(98.8) million during the three months ended December 31, 2011 and September 30, 2012, respectively, and $(301.8) million and $59.7 million for the years ended December 31, 2012 and 2011, respectively.

 

(6)                   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 the U.S. oil and gas joint venture 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 above table.

 

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

 

(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, 2.3 years, and 2.5 years during each of the three months ended December 31, 2012 and 2011 and September 30, 2012, respectively, and 2.5 years and 2.1 years during the years ended December 31, 2012 and 2011, respectively.

 

(10)            Rig hours represents the number of hours that our well-servicing rig fleet operated during the period.

 

10



 

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

 

Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except per share amounts)

 

2012

 

2011

 

2012

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Nabors (numerator):

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

129,272

 

$

89,535

 

$

65,818

 

$

239,055

 

$

342,164

 

Less: net (income) loss attributable to noncontrolling interest

 

(1,074

)

(1,400

)

(988

)

(621

)

(1,045

)

Adjusted income (loss) from continuing operations, net of tax - basic

 

$

128,198

 

$

88,135

 

$

64,830

 

$

238,434

 

$

341,119

 

Add interest expense on assumed conversion of our 0.94% senior exchangeable notes due 2011, net of tax (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) from continuing operations, net of tax - diluted

 

$

128,198

 

$

88,135

 

$

64,830

 

$

238,434

 

$

341,119

 

Income (loss) from discontinued operations, net of tax

 

(101,121

)

(193,985

)

10,826

 

(74,400

)

(97,440

)

Adjusted net income (loss) attributable to Nabors

 

$

27,077

 

$

(105,850

)

$

75,656

 

$

164,034

 

$

243,679

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

.44

 

$

.31

 

$

.22

 

$

.82

 

$

1.19

 

Basic from discontinued operations

 

(.35

)

(.68

)

.04

 

(.25

)

(.34

)

Total Basic

 

$

.09

 

$

(.37

)

$

.26

 

$

.57

 

$

.85

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

.44

 

$

.30

 

$

.22

 

$

.82

 

$

1.17

 

Diluted from discontinued operations

 

(.35

)

(.66

)

.04

 

(.26

)

(.34

)

Total Diluted

 

$

.09

 

$

(.36

)

$

.26

 

$

.56

 

$

.83

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares (denominator):

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding - basic

 

290,394

 

287,561

 

290,367

 

289,965

 

287,118

 

Net effect of dilutive stock options, warrants and restricted stock awards based on the if-converted method

 

2,027

 

3,403

 

2,134

 

2,358

 

5,366

 

Assumed conversion of our 0.94% senior exchangeable notes due 2011 (1)

 

 

 

 

 

 

Weighted-average number of shares outstanding - diluted

 

292,421

 

290,964

 

292,501

 

292,323

 

292,484

 

 


(1) At maturity in May 2011, we redeemed the remaining aggregate principal amount of $1.4 billion of our 0.94% senior exchangeable notes. Prior to maturity, we had purchased $1.4 billion par value of these notes in the open market for cash of $1.2 billion.

 

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 in the future were 15,000,882 and 13,930,575 shares during the three months ended December 31, 2012 and 2011, respectively; and 15,010,906 shares during the three months ended September 30, 2012; and 14,200,915 and 9,241,543 shares during the years ended December 31, 2012 and 2011, respectively. 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.

 

11


Exhibit 99.2

4Q 2012 Earnings Presentation February 20, 2013 Presenter: Anthony G. Petrello Chairman, President & Chief Executive Officer

 


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 Securities Act of 1933 and Section 21E of the 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. You should consider the following key factors when evaluating these forward-looking statements: • fluctuations in worldwide prices and demand for natural gas, natural gas liquids and crude oil; • fluctuations in levels of natural gas, natural gas liquids and crude 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; • the existence of operating risks inherent in the oilfield services industry; • the existence of regulatory and legislative uncertainties; • the possibility of changes in tax laws; • the possibility of political instability, 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 sustained increase or decrease in the price of natural gas, natural gas liquids or crude 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.

 


2012 Highlights Rig: PACE®-X1 at Crosby Yard

 


Consolidated Results: Record Operating Revenue, Gross Margin, EBITDA -$1.0 -$0.5 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 2006 2007 2008 2009 2010 2011 2012 EBITDA Total Capex Net Operating Cash Flow $0 $1 $2 $3 $4 $5 $6 $7 $8 2006 2007 2008 2009 2010 2011 2012 Operating Revenue Gross Margin EBITDA Note: Net Operating Cash Flow = EBITDA – Total Capex; Gross Margin = Operating Revenues – Direct Costs ($ Billions)

 


Debt Reduction Through Net Operating Cash Flow and Asset Sales ($MM's) 3/31/12 12/31/12 Change Total Debt $4,773 $4,380 $(393) Cash and ST Investments 494 778 284 Net Debt $4,279 $3,601 $(678) Net Debt to Capitalization(1) 42.4% 37.7% > Reduced Net Debt by $678 million from 1Q12 high > 2012 Operating Cash Flow less Capital Expenditures = $550 million (1) Capitalization defined as Net Debt plus Shareholders’ Equity (2) Subtotals may not total due to rounding

 


Improved Capital Discipline in 2012 Capital Expenditures ($MM’s) 2011 2012 Change U.S. Lower 48 $650 $649 $(1) U.S. Offshore 64 105 41 Alaska 4 4 0 Canada 95 103 8 International 654 265 (389) Rig Services 72 40 (32) Drilling & Rig Services $1,540 $1,166 $(374) Completion & Production Services $451 $214 $(237) Oil & Gas 209 101 (108) Corporate & Eliminations (18) (48) (30) Total Capital Expenditures $2,183 $1,434 $(749) > 34% year over year reduction in Capex > Deployed 25 new builds in U.S. Lower 48 > Signed 21 contracts, bringing the total PACE®-X commitments to be delivered in 2013 to 17 Subtotals may not sum due to rounding

 


Innovative PACE®-X Rig > Omni-directional walking system allows the rig to skid on both the X and Y axis > “Side Saddle” substructure features 16 ft. wide by 26 ft. tall clearance which optimizes batch drilling while allowing the rig to easily walk over existing well heads > BOP trolley enables batch drilling and reduces flat time when moving > Festoon electrical umbilical system allows moving up to 100 ft. on both the X and Y axis > One-fifth the permit loads of a traditional rig allows rig equipment to be moved at night and on weekends and holidays > Bootstrap mast allows rig up on smaller pads, approximately one- third the size required by competitors’ latest designs > Closed loop compatible mud system so cuttings can be hauled off in environmentally sensitive areas > Three Caterpillar 3512C engines come standard with Bi-Fuel conversion and option available for up to four Caterpillar 3516 natural gas engines > Bootstrap mast rigs up vertically with a hookload of 600, 800, or 1,000 kips > Setback capacity of over 20,000 ft. of 5” drill pipe > Optionality for 7500 psi mud system, plug and play fourth engine, and plug and play third 1,600 HP mud pump > Incorporates the latest Canrig equipment and software for automating the directional drilling process Awarded 9 new contracts 17 total PACE-X rigs to be delivered in 2013

 


Best Safety Performance In Company History 0 1 2 3 4 5 6 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Recordable Incidence Rate (TRIR) IADC US Land Nabors 2011 2012 Change Total Recordable Incidence Rate 1.66 1.18 (29%) (per 200,000 man hours) > Reduced Total Recordable Incidence Rate (TRIR) by 29% > Approximately $100 million spent on safety training and safety related equipment annually Source: IADC Incident Statistics Program

 


Expanded and Extended Bank Facilities ($MM’s) 2011 2012 Revolver Capacity $1,400 $1,500 Drawn Amount 860 890 Revolver Liquidity 540 610 2011 (Prior Facility) > Revolving Facilities – $1.4 billion committed facility – Additional $200 million accordion – 2014 maturity 2012 (New Facility) > Revolving Facilities – $1.5 billion committed facility – Additional $450 million accordion – 2017 maturity > New facility reduced LIBOR spread by 70 basis points to 130 basis points

 


Earliest Debt Maturity is 2018 ($MM’s) 2011 2012 Change $275M Sr. Notes $275 $0 $(275) $975M Sr. Notes @ 6.15% due 2018 968 969 1 $1.125B Sr. Notes @ 9.25% due 2019 1,125 1,125 $700M Sr. Notes @ 5% due 2020 697 698 1 $700M notes @ 4.625% due 2021 698 698 Total Senior Debt 3,763 3,490 (273) Revolving Credit Facility 860 890 30 Total Debt $4,624 $4,380 $(244)

 


Update on Strategic Objectives > Improving balance sheet quality and flexibility > Streamlining the business > Enhancing operational excellence > Driving technology and innovation > Strengthening customer alignment

 


Nabors Global Infrastructure Operating Income ($MM’s) 1Q12 2Q12 3Q12 4Q12 U.S. Lower 48 $132 $127 $115 $95 U.S. Offshore 8 10 (4) (14) Alaska 27 9 4 2 Canada 49 (4) 23 28 International 21 16 30 23 Rig Services 30 28 16 5 Drilling & Rig Services $267 $186 $185 $139 Completion Services $65 $46 $47 $30 Production Services 22 29 33 20 Completion & Production Services $87 $75 $80 $51 Corporate & Eliminations (38) (36) (37) (40) Total Operating Income $316 $225 $228 $150 Subtotals may not sum due to rounding

 


Drilling & Rig Services

 


Drilling & Rig Services Adjusted Income (Loss) Derived from Operating Activities ($M’s) 4Q11 1Q12 2Q12 3Q12 4Q12 Drilling & Rig Services: U.S. Lower 48 $130,114 $131,581 $126,532 $114,884 $94,719 U.S. Offshore 3,422 7,732 9,924 (3,650) (14,311) Alaska 5,343 27,420 8,895 3,973 2,195 Canada 36,553 49,287 (3,718) 22,889 28,078 International 23,450 21,138 16,401 30,299 23,388 Other Rig Services 13,152 29,846 28,179 16,207 4,829 Total $212,034 $267,004 $186,213 $184,602 $138,898

 


Global Rig Fleet Details AC SCR Mech Total Moving Systems Alaska 5 12 3 20 13 Lower 48 155 98 27 280 139 Canada 16 21 29 66 20 International 31 64 31 126 49 Offshore 6 44 2 52 n/a Total 213 239 92 544 221 As of 12/31/12 including contracted rigs scheduled to be delivered and moving systems scheduled to be installed 39% 44% 17% Rigs by Power Type AC SCR Mech 45% 55% Global Rigs with Moving Systems Moving Systems Non-Moving

 


Fleet Retirements Retirements Fleet as of 9/30/12 Active Inactive Fleet as of 12/31/12 Drilling & Rig Services U.S. Lower 48 Land Rigs 298 (35) 263 International Land Rigs 130 (4) (11) 126 Canada Land Rigs 73 (4) (10) 65 U.S. Offshore Rigs 29 (4) (7) 25 International Offshore Rigs 25 (1) 24 Note: Discrepancies between retirements and current fleet are due to new equipment and reclassifications of existing equipment to non-marketed

 


Versatile Fleet of Newbuilds PACE®-F Rig PACE®-M Rig PACE®-B Rig PACE®-X Rig > 27 built since May 2006 > 1000 kip hookload capacity > 600 kip setback capacity > Working in: Eagle Ford, Permian, Haynesville, Miss. Lime, Granite Wash, Woodford > 57 built since Dec. 2006 > 550 kip hookload capacity > 300, 350, or 400 kip setback capacity > Working in: Eagle Ford, Permian, Haynesville, Granite Wash, Woodford, Barnett, Marcellus, Niobrara, Monterrey, Piceance, Uinta > 29 built since Oct. 2009 > 800 kip hookload capacity > 500 kip setback capacity > Working in: Bakken > Serial #1 deployed to Haynesville Feb. 17th > 800 kip hookload capacity > 500 kip setback capacity > Reduces permit loads > Integrated moving system w/ X & Y capability

 


Lower 48 Working Rigs by Region and Play 14 52 16 19 29 21 3 11 Total Lower 48 Rigs on Revenue: 168 As of 12/31/12 Basin Working Rigs Marcellus 11 Haynesville 18 Bakken/Rockies 66 Eagle Ford 29 Permian 19 Barnett 3 Granite Wash 7 Other 15 Total 168

 


Lower 48 Newbuild Deployments

As of Dec 31, 2012, 144 Newbuilds deployed since 2005. 17 additional to be deployed by the end of 2013.

 


Lower 48 Pad Capable Rigs Non-Pad Capable 84% Pad Capable NBR 5% Pad Capable Industry 11% Industry Skid, 65 NBR Skid, 25 NBR Walking, 114 Industry Walking, 112 Industry Skid, 65 NBR Skid, 25 NBR Walking, 61 Industry Walking, 112 Source: Baker Hughes Land Rig Count, NBR Estimates Nabors currently has 1/3 of industry pad capable rigs and 1/3 of its walking rigs After 2013 newbuilds and upgrades, Nabors will have 45% of industry pad capable rigs and 50% of its walking rigs

 


Drilling & Rig Services US Lower 48 – Term Contracts in Force at December 31, 2012 Quarter End Number Of Rigs Subject To Term Contracts(1) 4Q12 1Q13 2Q13 3Q13 4Q13 3Q 2012 99 84 72 62 58 4Q 2012 109 95 81 69 63 (1) Represents the quarter end number of contracts in force with no incremental contract awards in the future ($MM’s) Actual Estimates Non-Working Rig Revenue 4Q12 1Q13 Out Years Lump Sum 21.5 2.4 -- Lump Sum: Amortized Monthly 0.6 0.6 2.9 Standby: Monthly 8.4 3.5 1.5 Total 30.5 6.5 4.4 Added 10 contracts in 4Q net of expirations Expect term contracts to decrease by 14 net of newbuilds

 


Canada Rig Fleet Details AC SCR Mech Total Moving Systems Canada 15 21 29 65 17 23% 32% 45% Rigs by Power Type AC SCR Mech 23% 77% Rigs with Moving Systems Moving Systems Non-Moving 73% 27% Rigs with Top Drives Top Drive No Top Drive 28% 60% 12% Since 2005 Newbuild Upgraded Original As of 12/31/12

 


Canada Drilling 0 10 20 30 40 50 60 2Q 3Q 4Q 1Q Recent Seasonal Ramps 2010/2011 2011/2012 2012/2013 0 10 20 30 40 50 60 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Canada Rig Year Seasonality Canada Rig Years 4Q rig count lower than traditional high, still expect 1Q to reach traditional highs

 


Canada Working Rigs by Play Play AC SCR Mechanical Walking Rigs Workover Rigs Montney 4 3 1 5 2 Duvernay (NW Alberta) 36 Cardium (Central Alberta) 2 10 15 2 37 Saskatchewan 3 1 9 Oil Sands 3 2 4 8 Horn River 1 2 2 0 Total 10 17 19 14 94 As of 12/31/12

 


International Land Working Rigs 5 17 10 6 2 2 1 1 2 4 11 32 1 5 3 5 Algeria 5 Ecuador 6 Kuwait 2 Romania 1 Angola 1 India 5 Malaysia 2 Russia 4 Argentina 17 Iraq 6 Mexico 11 Saudi Arabia 32 Colombia 10 Jordan 1 Oman 5 Venezuela 5 Congo 2 Kazakhstan 2 PNG 1 Yemen 3 5 2 1 Total 122

 


International Land Fleet Details AC SCR Mech Total Moving Systems International 31 64 31 126 49 24% 51% 25% Rigs by Power Type AC SCR Mech 39% 61% Rigs with Moving Systems Moving Systems Non-Moving 90% 10% Rigs with Top Drives Top Drive No Top Drive 31% 35% 34% Since 2005 Newbuild Refurbished Original

 


Completion & Production Services

 


Completion & Production Services Adjusted Income Derived from Operating Activities ($M’s) 4Q11 1Q12 2Q12 3Q12 4Q12 Completion & Production Services: Completion Services $76,470 $64,860 $46,144 $47,218 $30,296 Production Services 24,237 21,888 28,586 32,825 20,360 Total $100,707 $86,748 $74,730 $80,043 $50,656

 


Completion & Production Services Fleet Region Rigs Frac Crews Trucks Frac Tanks CTU Cementing Wireline Additional Equipment Western 181 106 99 15 12 P&A Rigs, Foam Units Rockies 69 10 56 323 2 9 10 P&A Rigs, Pumps, Swivels Mid-Con 36 1 111 412 2 7 8 Reverse Units, Foam Units Northeast 11 4 105 582 4 39 12 Rig Moving, Excavation West Texas 105 3 335 1,192 3 2 Reverse Units, Foam Units South Texas 24 3 197 570 4 6 2 Condensate Trucks Ark-La-Tex 16 3 121 349 6 P&A Rigs Gulf Coast 3 Canada 106 2 P&A Rigs Total 548 26 1,031 3,527 27 79 34

 


Fleet Retirements Retirements Fleet as of 9/30/12 Active Inactive Other Fleet as of 12/31/12 Completion & Production Services U.S. Lower 48 W/O & Well Servicing Rigs 504 (62) (71) 442 U.S. Lower 48 Trucks 1,043 (36) (50) 24 1,031 U.S. Lower 48 Frac Tanks 3,813 (282) (26) (4) 3,527 Canada W/O & Well Servicing Rigs 176 (20) (50) 106 Note: “Other” is made up of the net of new equipment and reclassifications from active to inactive

 


Stimulation Fleet Contract Detail Region # of Crews TSA Spot Idle Oil/Liquids Dry Gas 24 Hr. Rockies 10 7 3 10 6 Mid-Con 1 1 1 Northeast 4 1 3 2 2 3 West Texas 3 1 1 1 3 1 South Texas 3 2 1 3 3 Ark-La-Tex 3 3 3 Canada 2 2 2 Total 26 11 10 5 21 5 13

 


Production Services Rates and Hours 500,000 600,000 700,000 800,000 900,000 $380 $420 $460 $500 $540 $580 2009 2010 2011 2012 Workover & Well Servicing Rigs Rates and Hours Rig Hours Rig Rate 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 $80 $90 $100 $110 $120 $130 2009 2010 2011 2012 Fluid Hauling Trucks Rates and Hours Truck Hours Truck Rate

 


Summary

 

Ancillary Information

 


Nabors Global Infrastructure Margins and Activities 4Q11 3Q12 4Q12 Drilling Margin (1) Rig Yrs Margin (1) Rig Yrs Margin (1) Rig Yrs US Lower 48 10,922 216.7 $12,030 193.8 $12,363 172.7 US Offshore 17,250 10.0 8,634 12.8 (428) 12.4 Alaska 29,489 5.0 29,628 4.6 22,344 5.2 Canada 12,061 45.2 13,439 34.0 14,389 36.3 International 11,065 113.2 12,299 119.2 12,004 119.3 Production Services Rev/Hr Rig Hrs Rev/Hr Rig Hrs Rev/Hr Rig Hrs US Lower 48 $511 202,816 $576 217,675 $590 202,368 Canada 808 52,712 748 43,849 818 44,582 (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.