HAMILTON, Bermuda, April 30, 2019 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors" or the "Company") (NYSE: NBR) today reported first quarter 2019 operating revenue of $800 million, compared to operating revenue of $782 million in the fourth quarter of 2018. Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $122 million, or $0.36 per share, compared to a loss of $188 million, or $0.55 per share, in the prior quarter. Results for the fourth quarter of 2018 included net impairments and other charges of $52 million, or $0.15 per share after tax, and a separate non-cash income tax charge of $52 million, or $0.15 per share, related to the establishment of a reserve on our deferred tax asset in Canada.
Adjusted operating income for the Company was a narrowing loss of $13 million in the first quarter, compared to a loss of $25 million in the fourth quarter of 2018. First-quarter consolidated adjusted EBITDA was $197 million compared to $202 million in the previous quarter. An $11 million improvement in the U.S. market was offset by an $8 million reduction in International. Results in Latin America were affected by market-related and operational issues. These included the U.S. sanctions and turmoil in Venezuela, as well as an activity drop in Argentina driven by the recent reduction in regulated natural gas prices. In addition, the Canada rig count and margins fell as the normal seasonal peak was overwhelmed by the currently weak market. Finally, the two fewer calendar days in the first quarter translated into an unfavorable impact of $6 million in adjusted EBITDA for the global drilling and drilling solutions operations.
Anthony G. Petrello, Nabors Chairman, CEO and President, commented, "Our U.S. Drilling segment continues to perform exceptionally well as illustrated by a 10% sequential increase in quarterly adjusted EBITDA on a 5% increase in revenue. This was principally due to improved pricing on a slightly higher rig count in our Lower 48 operations. Our current rig count in the Lower 48 stands at 115 rigs, four more than both our quarterly average and our exit rate for the first quarter. Dayrates for our high-specification rigs continue to exceed the mid-$20,000 level. We expect to see further improvement in this market throughout the year. During the quarter, our International segment hampered our consolidated results due to activity and operational issues in Latin America. We anticipate compensating for these unfavorable items during the second quarter with additional rigs and improved operational performance. Canada also faced headwinds as the current market weakness resulted in an atypical sequential reduction in what should be our peak seasonal quarter."
Mr. Petrello continued, "During the quarter, we achieved several milestones in our various automation and integration initiatives that should bolster results going forward. Most notable among these was the securing of multiple commercial jobs for our Navigator™ and ROCKit® Pilot directional drilling automation systems. Today the majority of these installations are operated remotely with no directional drillers at the rig site. We also are seeing increasing adoption of our automated tubular running technologies and our rotary steerable system is delivering good results in customer field trials. Additionally, we installed and commissioned our first drill floor robot on a semisubmersible rig in the North Sea and signed a contract for our first complete robotic drill floor automation system. This system is planned for installation on a North Sea platform around the end of the year."
Consolidated and Segment Results
The U.S. Drilling segment reported a 10% sequential increase in adjusted EBITDA, to $125 million. The increase is attributable to improved results in the Lower 48 and Alaska operations. The average rig count in the Lower 48 increased slightly, as contracted deployments of upgraded rigs offset a minor decline in the number of legacy rigs operating, while nearly all of the Company's high-specification rigs remained under contract. The performance of these rigs, equipped with the Company's proprietary Rigtelligence® software, is receiving strong customer recognition as evidenced by Nabors' increasing share in the demanding unconventional market. This segment's rig count currently stands at a cyclical high of 123, with 115 of those working in the Lower 48. The Company still expects the Lower 48 rig count to increase to approximately 120 by year-end, as the remaining contracted rig upgrades deploy.
International Drilling adjusted EBITDA decreased sequentially by 9%, to $86 million, primarily reflecting idled rigs and other operational issues in Latin America, mainly in Argentina and Venezuela. The two fewer calendar days in the first quarter accounted for $2.3 million of the sequential decrease. The quarterly average rig count increased by two to 90, primarily reflecting the full-quarter contribution from fourth-quarter rig deployments in Colombia and Saudi Arabia. The average margin per day decreased sequentially from approximately $13,500 to $12,600, reflecting costs associated with idled rigs, as well as the last of the pricing concessions granted on the rollover of a number of contracts in the Eastern Hemisphere.
Canada operations were adversely impacted by the industry-wide weak rig count in what would usually be the seasonally strongest quarter. Adjusted EBITDA of $7.4 million was down from $9.5 million in the fourth quarter. Daily gross margin decreased sequentially to nearly $6,100. Although the quarterly average rig count declined sequentially from 18 to 16, Nabors has gained market share year over year.
In Drilling Solutions, adjusted EBITDA of $21.0 million was $2.0 million below the fourth quarter, with lower project-related revenue. The segment's drilling performance software revenue continued to strengthen with increased penetration of its automation systems.
In the Rig Technologies segment, first quarter adjusted EBITDA loss of $2.3 million was approximately $1.0 million less than the fourth quarter. The results reflect improved positive results in Canrig, which were more than offset by costs related to the commercialization of the rotary steerable tool and higher expenses associated with the recently-signed contract for an integrated robotic drilling system.
Capital Expenditures and Liquidity
During the first quarter, net debt increased by $104 million in line with the Company's expectations. This increase includes $81 million in semi-annual interest payments on senior unsecured notes. In addition, operations in the first quarter tend to consume more cash as various annual expenses are incurred at the beginning of the year, including property and other taxes as well as the payment of annual incentive bonuses to employees. These outflows accounted for approximately $50 million in the first quarter. Capital expenditures for the quarter were $146 million. The full year capital expenditures are anticipated to be front-loaded as most of the U.S. Lower 48 rig upgrades are planned for the first half of the year. Nabors expects to reduce capital expenditures for the second quarter to approximately $100 million.
William Restrepo, Nabors Chief Financial Officer, stated, "Cash flow consumption in the first quarter was near the top of the range of our internal expectations. The first quarter is normally burdened with significant beginning-of-year cash outlays, which will not repeat during the year. We remain committed to containing capital spending to approximately $400 million for the full year. We expect strong cash flow generation in the second quarter. Interest and dividend payments should decrease by approximately $100 million. In addition, our second quarter expectations are supported by the absence of the beginning-of-year cash outlays, the reduction in capex, improving operating results and a reduction in working capital. We maintain our net debt reduction target of $200 to $250 million during 2019."
Mr. Petrello concluded, "We remain confident in our full-year targets for income, cash flow and a corresponding net debt reduction. In the U.S., our strategy of deploying high-specification intelligent rigs to the industry's most demanding customers is paying off in both utilization and rates. The second quarter should continue to deliver higher margins on higher rig count in the Lower 48 as we continue to deploy contracted rig upgrades. International adjusted EBITDA should return to the $90 million mark. In our remaining segments other than Canada, we also expect improved adjusted EBITDA in the second quarter. Notwithstanding the uncertainty during the first half of this year, we anticipate further progress throughout 2019 with an acceleration in the second half of this year."
Nabors (NYSE: NBR) owns and operates one of the world's largest land-based drilling rig fleets and is a provider of offshore platform rigs in the United States and numerous international markets. Nabors also provides directional drilling services, performance tools, and innovative technologies for its own rig fleet and those of third parties. Leveraging our advanced drilling automation capabilities, Nabors highly skilled workforce continues to set new standards for operational excellence and transform our industry.
The information included in this 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 a number of 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 press release reflect management's estimates and beliefs as of the date of this press release. Nabors does not undertake to update these forward-looking statements.
This press release presents certain "non-GAAP" financial measures. The components of these non-GAAP measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to make. Net debt is calculated as total debt minus the sum of cash and cash equivalents and short-term investments. Each of these non-GAAP measures has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA, adjusted operating income (loss), and net debt, because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance. Securities analysts and investors also use these measures as some of the metrics on which they analyze the Company's performance. Other companies in this industry may compute these measures differently. A reconciliation of consolidated adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes and net debt to total debt, which are their nearest comparable GAAP financial measures, are included in the tables at the end of this press release.
Media Contact: Dennis A. Smith, Vice President of Corporate Development & Investor Relations, +1 281-775-8038 or William Conroy, Senior Director of Corporate Development & Investor Relations, +1 281-775-2423. To request investor materials, contact Nabors' corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail firstname.lastname@example.org
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SOURCE Nabors Industries Ltd.