Nabors Industries Ltd. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Completed significant transactions, reducing net debt by $554 million and annualized cash interest expense by approximately $45 million. Parker businesses are projected to contribute at least $70 million in adjusted EBITDA in 2026.
• Adjusted EBITDA totaled $222 million, better than previous expectations, driven by stronger overall performance in the Lower 48 rig count and daily margin, and growth from NDS casing running and managed pressure drilling.
• Discussed oil price market environment with factors like tariff uncertainty, OPEC production, and conflicts; Venezuela operations with 5 idle rigs and readiness to return to work with suitable terms; U.S. market focus on maintaining production and positive gas outlook.
• SANAD joint venture in Saudi Arabia expanding new-build fleet, with rigs resuming operations and evaluating alternatives for smaller rigs. U.S. market rig count trends and high-end rigs like PACE-X Ultra performing well.
• Capital structure improvement with net debt down to the lowest level since 2005 and commitment to further debt reduction.

Segment Performance

• International Drilling: Revenue was $424 million, showing a sequential growth of $17 million or 4.1%. EBITDA totaled $131 million, an increase of $4 million or 2.9% quarter over quarter, with an EBITDA margin of 31%.
• U.S. Drilling: Fourth quarter revenue was $241 million, a 3.7% sequential decline. EBITDA was $93 million, a 1% sequential decrease, resulting in an EBITDA margin of 30.7%.
• Drilling Solutions: Generated revenue of $108 million in the fourth quarter and EBITDA of $41 million, with an EBITDA margin of 38.3%.
• Rig Technologies: Revenue was $38 million in the fourth quarter, a sequential increase of 6%, and EBITDA was $5 million, up $1 million from the prior quarter.

Guidance

• Full year 2025: Revenue was $3.2 billion, a 8.7% year-over-year growth; adjusted EBITDA was $913 million, $31 million higher than the prior year.
• First quarter 2026: U.S. Drilling expected average rig count in range of 64-65; Alaska and offshore EBITDA expected $16-17 million; International Drilling average rig count expected 91-92; Drilling Solutions EBITDA ~$39 million; Rig Technologies EBITDA ~$2 million.
• Full year 2026: Expected EBITDA growth 6-8% normalized for Quail; U.S. Drilling Lower 48 average 61-64 rigs; Alaska and offshore combined EBITDA $55-60 million; International Drilling average rig count 96-98; Nabors Drilling Solutions EBITDA $160-170 million; Rig Technologies EBITDA $22-25 million.

Risks

• Oil price uncertainty due to factors like tariff actions, production increases, inventory builds, and conflicts involving Ukraine and Iran.
• Labor market tightness in Saudi Arabia impacting rig operations.
• Commodity price volatility affecting the U.S. market's drilling activity and revenue.
• Potential reactivation of Venezuela rigs dependent on suitable commercial terms and security arrangements.

Question and Answer

Q: Derek Podhaizer on Lower 48 outlook A: William Conroy discussed rig count shifts, gas drilling trends, and Nabors' position with PACE-X rigs suited for longer laterals Q: Keith Mackey on Saudi Arabia rigs A: Miguel Rodriguez mentioned suspended rigs in Saudi Arabia returning to work in late Q1 and Q2 Q: Scott Gruber on Mexico A: William Conroy and Miguel Rodriguez spoke about Mexico platform rig resumption and CapEx for in-kingdom new-builds Q: John Daniel on second half caution and CAN rig wrenches A: Keith Mackey addressed market caution and the benefits of CAN rig wrenches with automation and improved cycle times