Nabors announces 1Q 2014 EPS of $0.16 per Share

HAMILTON, Bermuda, April 22, 2014 /CNW/ - Nabors Industries Ltd. (NYSE:NBR) today reported its financial results for the first quarter of 2014. Adjusted income derived from operating activities was $109.0 million, compared to $143.1 million in the first quarter of 2013 and $159.6 million in the fourth quarter of 2013. Operating cash flow (EBITDA) was $391.2 million for the first quarter, compared to $412.5 million and $437.2 million, respectively, in the first and fourth quarters of last year. Net income from continuing operations was $49.0 million ($0.16 per diluted share), compared to $92.2 million ($0.31 per diluted share) in the first quarter of 2013 and $128.5 million ($0.42 per diluted share) in the fourth quarter of 2013. Operating revenues and earnings from unconsolidated affiliates for this quarter totaled $1.59 billion, compared to $1.54 billion in the comparable quarter of the prior year and $1.61 billion in the fourth quarter of 2013.

Tony Petrello, Nabors' Chairman, President & CEO, commented, "As expected, weather-induced interruptions in our Completion Services segment overshadowed what was otherwise relatively good performance by our various drilling operations. Seasonal increases in Canada and Alaska, along with higher third-party sales in Canrig, partially offset the sharp reduction in Completion results. Operating income for our international and U.S. Lower 48 operations decreased slightly below the strong fourth quarter level, but was better than expected on higher rig years. Notable developments during the quarter include securing four additional term contracts for new PACE-X® rigs and emerging indications of strengthening market fundamentals in virtually all of our business segments."

Drilling & Rig Services

Operating income in the Drilling & Rig Services business line was essentially flat sequentially at $155.5 million, while operating cash flow was slightly higher at $382.2 million. The quarter's results reflect higher seasonal contributions from Canada and Alaska, offset by lower results in U.S. Lower 48 land and International drilling operations.

International results were better than anticipated, although lower sequentially. The decrease is attributable to previously disclosed items related to unusual rig moving costs and the anticipated time between contracts for certain high-margin rig operations, including the dry-docking of the Company's large Arabian Gulf jackup. Second quarter results are expected to be in line with the first quarter, followed by progressively improving results starting in the third quarter. Contributions from the 21 new and upgraded rigs deploying through early 2015, the return to operations of the aforementioned rigs between contracts and the commencement of rate increases associated with several contract renewals will drive these improvements, all of which should develop fully by the middle of next year.

In North America, U.S. Drilling results improved slightly sequentially after adjusting for the $4.7 million early termination revenue received in the fourth quarter. Seasonally higher results in Alaska more than offset higher costs in the Lower 48, primarily attributable to first-quarter payroll taxes. The outlook for U.S. Drilling is increasingly positive in all regions of this segment. Activity in Alaska is expected to be less seasonal going forward, as the recently improved tax environment is leading to more rigs operating on a year-round basis. Deployment of a new large deepwater platform drilling rig should lead to significantly improved results in the Gulf of Mexico offshore operation, commencing in the fourth quarter. In the Lower 48 land operation, market activity and pricing appear to be strengthening, as higher than expected customer cash flows and moderating rig productivity are translating into incremental rig demand. This increasing demand is reflected in today's rig count of 199, which represents a 30-rig increase since the beginning of the fourth quarter, including eight which were previously receiving standby revenue but not working. Spot-market price increases now appear to be accelerating in selected areas. Canada posted seasonally-high quarterly results that were modestly below those of the same quarter last year. Although activity increased by four rigs, the average margin was lower due the mix shift to shallower rigs and a more competitive environment.

Rig Services' operating income was $8.7 million, representing a sizable improvement over last quarter's loss of $2.2 million. Essentially all of the improvement is attributable to Canrig, whose steadily increasing backlog is now the highest it has been in several years.

Completion & Production Services

The Completion & Production Services business line recorded an operating loss of $3.0 million, with operating cash flow of $53.4 million. The conclusion of a long-term contract and protracted downtime resulting from the series of winter storms that characterized the first quarter both contributed to these weak results. The weather impact was concentrated in Completion Services, which posted a $34 million loss, while Production Services saw only minimal effects. Weather aside, both elements of this business are seeing emerging evidence of improving market fundamentals. Similar to the Drilling & Rig Services business line, higher customer cash flows and moderating productivity are resulting in increased utilization, which should in turn exert upward pressure on pricing.

Production Services benefited from seasonally high activity in Canada, coupled with a modest sequential increase in both trucking and rig hours at flat rates. Second-quarter results are likely to be similar with the seasonal falloff in Canada, but should be followed by improving results. Demand for truck and rig services appears to be increasing. As a result, the Company anticipates higher pricing in light of the relatively high industry utilization and the diminishing supply of viable inventory that can be reactivated to meet the increased capacity requirements.

Completion Services results reflect not only the weather delays experienced across the Rocky Mountain, Bakken and Appalachia operations, but also the expiration of a significant long-term contract for two spreads in late fourth quarter. The weather in the northern regions has abated and first-quarter exit rates indicate a restoration of profitability in the second quarter. Industry fundamentals appear to be strengthening, evidenced by the emergence of higher underlying industry utilization in the fourth and first quarters. This increase in activity, in the face of moderating frac crew productivity, is leading to higher industry utilization and correspondingly higher maintenance expenditures. These factors are, in turn, exerting upward pressure on pricing. The first quarter's operational interruptions and producers' ensuing difficulty in meeting oil and gas production targets appear to be generating significant pent-up demand in the northern regions. Coupled with the increased demand associated with the rapid conversion to horizontal completions in West Texas, this may be a catalyst for improving industry returns.

Summary and Outlook

Petrello concluded, "Notwithstanding the weak performance of our Completion Services operations in the first quarter and the dampening impact the Canadian breakup usually exerts on our second quarter, I am increasingly confident in the near and intermediate-term outlook for all of our segments. My confidence is driven by the prospects for improvement in rates and utilization across most of our operations and the progress we are making on our numerous business improvement initiatives. Our PACE-X® rigs are deploying at a steady rate and continue to attract customer interest, while our multiple international deployments continue on schedule and on budget."

About Nabors

The Nabors companies own and operate approximately 493 land drilling rigs throughout the world and approximately 543 land workover and well servicing rigs in North America. Nabors' actively marketed offshore fleet consists of 39 platform rigs, 7 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 800,000 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.

The Company will host a conference call to review the quarterly results and forward business outlook tomorrow, Wednesday April 23, 2014, at 10:00 a.m. central time. Interested parties can access the call and supporting slides through a link provided on the www.nabors.com home page.

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



March 31,


December 31,








(In thousands, except per share amounts)


2014


2013


2013








Revenues and other income:







Operating revenues


$ 1,589,618


$ 1,535,478


$ 1,606,978

Earnings (losses) from unconsolidated affiliates


(2,445)


2,895


(1,588)

Investment income (loss)


980


79,421


1,106

Total revenues and other income


1,588,153


1,617,794


1,606,496








Costs and other deductions:







Direct costs


1,061,739


994,992


1,032,841

General and administrative expenses


134,266


130,878


135,307

Depreciation and amortization


282,127


269,365


277,658

Interest expense


44,810


60,011


47,075

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


1,476


59,737


10,732

Total costs and other deductions


1,524,418


1,514,983


1,503,613








Income (loss) from continuing operations before income taxes


63,735


102,811


102,883








Income tax expense (benefit)


14,008


9,854


(26,383)








Subsidiary preferred stock dividend


750


750


750








Income (loss) from continuing operations, net of tax


48,977


92,207


128,516

Income (loss) from discontinued operations, net of tax


1,515


7,011


23,113








Net income (loss)


50,492


99,218


151,629

Less: Net (income) loss attributable to noncontrolling interest


(573)


(97)


(1,026)

Net income (loss) attributable to Nabors


$ 49,919


$ 99,121


$ 150,603








Earnings (losses) per share: (1)







Basic from continuing operations


$ .16


$ .31


$ .43

Basic from discontinued operations


.01


.03


.07

Basic


$ .17


$ .34


$ .50








Diluted from continuing operations


$ .16


$ .31


$ .42

Diluted from discontinued operations


-


.02


.08

Diluted


$ .16


$ .33


$ .50















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







Basic


296,210


291,687


295,218

Diluted


299,050


294,170


297,746















Adjusted EBITDA (2)


$ 391,168


$ 412,503


$ 437,242








Adjusted income (loss) derived from operating activities (3)


$ 109,041


$ 143,138


$ 159,584



(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 from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. There are limitations inherent in using adjusted EBITDA as a measure of overall profitability because it excludes significant expense items. 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. These amounts should not be used as a substitute for the amounts reported in accordance with GAAP. To compensate for the limitations in utilizing adjusted EBITDA as an operating measure, management also uses GAAP measures of performance, including income from continuing operations and net income, to evaluate performance, but only with respect to the Company as a whole and not on a segment basis. 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 and depreciation and amortization 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)










March 31,


December 31,

(In thousands, except ratios)


2014


2013






ASSETS





Current assets:





Cash and short-term investments


$ 424,767


$ 507,133

Accounts receivable, net


1,454,368


1,399,543

Assets held for sale


231,880


243,264

Other current assets


580,253


603,890

Total current assets


2,691,268


2,753,830

Long-term investments and other receivables


2,915


3,236

Property, plant and equipment, net


8,690,759


8,597,813

Goodwill


512,391


512,964

Investment in unconsolidated affiliates


63,069


64,260

Other long-term assets


226,671


227,708

Total assets


$ 12,187,073


$ 12,159,811






LIABILITIES AND EQUITY





Current liabilities:





Current debt


$ 5,296


$ 10,185

Other current liabilities


1,232,846


1,301,239

Total current liabilities


1,238,142


1,311,424

Long-term debt


3,812,476


3,904,117

Other long-term liabilities


1,095,998


893,905

Total liabilities


6,146,616


6,109,446






Subsidiary preferred stock (1)


69,188


69,188






Equity:





Shareholders' equity


5,960,469


5,969,086

Noncontrolling interest


10,800


12,091

Total equity


5,971,269


5,981,177

Total liabilities and equity


$ 12,187,073


$ 12,159,811



(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%.

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



March 31,


December 31,








(In thousands, except rig activity)


2014


2013


2013








Reportable segments:







Operating revenues and Earnings (losses) from unconsolidated affiliates:







Drilling and Rig Services:







U.S.


$ 510,476


$ 484,773


$ 471,027

Canada


111,621


126,867


88,623

International


375,069


321,516


407,615

Rig Services (1)


143,726


134,231


132,502

Subtotal Drilling and Rig Services (2)


1,140,892


1,067,387


1,099,767








Completion and Production Services:







Completion Services


227,899


262,138


292,039

Production Services


275,400


251,571


266,235

Subtotal Completion and Production Services (3)


503,299


513,709


558,274








Other reconciling items (4)


(57,018)


(42,723)


(52,651)

Total operating revenues and earnings (losses) from unconsolidated affiliates

$ 1,587,173


$ 1,538,373


$ 1,605,390








Adjusted EBITDA: (5)







Drilling and Rig Services:







U.S.


$ 187,637


$ 184,859


$ 187,426

Canada


40,119


45,531


29,159

International


137,991


106,514


157,720

Rig Services (1)


16,491


9,334


5,937

Subtotal Drilling and Rig Services (2)


382,238


346,238


380,242








Completion and Production Services:







Completion Services


(6,654)


46,724


40,851

Production Services


60,056


51,118


55,574

Subtotal Completion and Production Services (3)


53,402


97,842


96,425








Other reconciling items (6)


(44,472)


(31,577)


(39,425)

Total adjusted EBITDA


$ 391,168


$ 412,503


$ 437,242








Adjusted income (loss) derived from operating activities: (7)







Drilling and Rig Services:







U.S.


$ 72,494


$ 77,595


$ 75,378

Canada


26,160


30,518


14,536

International


48,119


21,469


69,612

Rig Services (1)


8,728


1,287


(2,179)

Subtotal Drilling and Rig Services (2)


155,501


130,869


157,347








Completion and Production Services:







Completion Services


(33,635)


17,756


14,072

Production Services


30,591


26,014


26,736

Subtotal Completion and Production Services (3)


(3,044)


43,770


40,808








Other reconciling items (6)


(43,416)


(31,501)


(38,571)

Total adjusted income (loss) derived from operating activities


$ 109,041


$ 143,138


$ 159,584








Rig activity:







Rig years: (8)







U.S.


206.6


189.6


198.4

Canada


43.8


40.0


32.5

International (9)


129.8


122.7


124.6

Total rig years


380.2


352.3


355.5

Rig hours: (10)







U.S. Production Services


209,982


212,298


205,456

Canada Production Services


41,540


48,027


36,455

Total rig hours


251,522


260,325


241,911



(1)

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



(2)

Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of ($2.5) million, $2.8 million and ($1.4) million for the three months ended March 31, 2014 and 2013 and December 31, 2013, respectively.



(3)

Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $.1 million, $.1 million and ($.2) million for the three months ended March 31, 2014 and 2013 and December 31, 2013, respectively.



(4)

Represents the elimination of inter-segment transactions.



(5)

Adjusted EBITDA is computed by subtracting the sum of direct costs and general and administrative expenses from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. There are limitations inherent in using adjusted EBITDA as a measure of overall profitability because it excludes significant expense items. 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. These amounts should not be used as a substitute for the amounts reported in accordance with GAAP. To compensate for the limitations in utilizing adjusted EBITDA as an operating measure, management also uses GAAP measures of performance, including income from continuing operations and net income, to evaluate performance, but only with respect to the Company as a whole and not on a segment basis. 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".



(6)

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



(7)

Adjusted income (loss) derived from operating activities is computed by subtracting the sum of direct costs, general and administrative expenses and depreciation and amortization 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".



(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 during each of the three months ended March 31, 2014 and 2013 and December 31, 2013.



(10)

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

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)










Three Months Ended



March 31,


December 31,








(In thousands)


2014


2013


2013








Adjusted EBITDA


$ 391,168


$ 412,503


$ 437,242

Less: Depreciation and amortization


282,127


269,365


277,658

Adjusted income (loss) derived from operating activities


109,041


143,138


159,584








Interest expense


(44,810)


(60,011)


(47,075)

Investment income (loss)


980


79,421


1,106

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


(1,476)


(59,737)


(10,732)

Income (loss) from continuing operations before income taxes


$ 63,735


$ 102,811


$ 102,883

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



March 31,


December 31,








(In thousands, except per share amounts)


2014


2013


2013








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







Income (loss) from continuing operations, net of tax


$ 48,977


$ 92,207


$ 128,516

Less: net (income) loss attributable to noncontrolling interest


(573)


(97)


(1,026)

Less: earnings allocated to unvested shareholders


(733)


(814)


(1,948)

Adjusted income (loss) from continuing operations - basic and diluted


$ 47,671


$ 91,296


$ 125,542

Income (loss) from discontinued operations, net of tax


1,515


7,011


23,113



$ 49,186


$ 98,307


$ 148,655








Earnings (losses) per share:







Basic from continuing operations


$ .16


$ .31


$ .43

Basic from discontinued operations


.01


.03


.07

Total Basic


$ .17


$ .34


$ .50








Diluted from continuing operations


$ .16


$ .31


$ .42

Diluted from discontinued operations


-


.02


.08

Total Diluted


$ .16


$ .33


$ .50








Shares (denominator):







Weighted-average number of shares outstanding-basic


296,210


291,687


295,218

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


2,840


2,483


2,528

Weighted-average number of shares outstanding - diluted


299,050


294,170


297,746



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 were 7,853,509 and 12,452,263 shares during the three months ended March 31, 2014 and 2013, respectively; and 10,908,160 shares during the three months ended December 31, 2013. 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.

SOURCE Nabors Industries Ltd.

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