NABORS LOSS $(41.9) MLN

Nabors Industries Ltd. ("Nabors")(NYSE: NBR)today reported second-quarter revenue and earnings from unconsolidated affiliates of $862 million, compared to $1.42 billion in the first quarter of 2015, and $1.62 billion in the second quarter of last year. The comparable quarters included $367 million and $535 million respectively, in revenue from Completion and Production Services, a business line that merged with C&J Energy Services on March 24, 2015. Beginning in the second quarter, Nabors' results reflect equity-method accounting for this investment on a quarter-lag basis.

Net income from continuing operations reported for the second quarter was a loss of $41.9 million or $0.14 per diluted share, which includes $0.23 of tax expense. This compares to first-quarter net income from continuing operations of $124.4 million or $0.43 per diluted share; or $58.3 million, or $0.20 per share, after excluding $66.1 million attributable to the after-tax net gain from the C&J Energy Services transaction, tax benefits and after-tax severance charges from workforce reductions. The first-quarter comparable results also include income from the Completion and Production Services business.

Anthony Petrello, Nabors' Chairman and CEO, commented, "Our second-quarter operating results, while down significantly, were better than we had anticipated. This was largely attributable to a resilient international business and stringent cost control throughout the organization. The sequential decrease was driven by: lower drilling activity in the U.S. Lower 48, rate concessions and slightly lower utilization internationally, seasonally lower activity in Canada and Alaska, and a depleting backlog in Canrig, partially offset by the initial contribution from six new rigs deployed during the quarter. We continued to bolster the long-term future of the Company with a more streamlined cost structure and the purchase of our partners' interest in our Saudi Arabia entity. Our ability to expand and extend our revolving credit facility in the middle of an industry downturn with a group of 17 global banks, 3 of which are new to the facility, is a testament to our banking group's confidence in our financial strength and future prospects.

Segment Results

Adjusted income derived from operating activities ("operating income") in Drilling and Rig Services decreased 48% to $104.9 million from $201.3 million in the first quarter of this year. Adjusted EBITDA in this unit was $323.6 million, primarily attributable to the International segment.

International operating income decreased by 21% sequentially to $83.3 million, reflecting the impact of negotiated rate reductions. Going forward, the Company still foresees the potential for further declines in its international rig count and average margins as the effects of weak oil prices progressively influence the international market. Despite the softening conditions, full-year results for the International segment are still expected to increase compared to 2014.

In North America, drilling activity within the U.S. Drilling and Canada segments declined significantly throughout the quarter, resulting in decreases in operating income of $45.6 million and $14.6 million, respectively. In the Lower 48, activity declined throughout the quarter with 33 contracted rigs expiring. Although the decline in U.S. activity appears to be bottoming, oil price risk remains and lower income is expected as contracts expire and reprice at lower rates. Results in Canada and Alaska declined seasonally. In the U.S. Gulf of Mexico the Company's new deepwater platform rig received a reduced mobilization dayrate throughout the quarter. However, the commencement of its full operating rate has been delayed for an indefinite period of time due to issues with the installation of the customer's platform.

Rig Services, which consists of the Company's manufacturing and directional drilling operations, reported negative operating income of $1.6 million, as the industry's newbuild activity and drilling activity has declined.

Financial Discussion

The second quarter included several items that impacted the operational results of the Company. First, the results of the Saudi Arabia joint venture will now be reported on a consolidated basis due to the purchase of the partner's interest by Nabors in May 2015. Second, the International segment results were negatively impacted by $5 million related to a customer bankruptcy in Latin America. Finally, the Company is now recording its proportionate share of C&J Energy Services earnings with a one-quarter lag. Accordingly, second-quarter results included a loss of $0.8 million related to the Company's ownership stake in C&J Energy Services during the first quarter of this year, beginning March 24, 2015.

Income tax expense in the second quarter exceeded the Company's income before taxes due to the true-up of the Company's year-to-date tax provision to the full-year expected tax rate. Accordingly, the second quarter's tax rate is not representative of the full year anticipated rate and the Company currently expects a tax benefit for the third quarter and full year.

William Restrepo, Nabors' Chief Financial Officer, stated, "Nabors plans to emerge from the current market in a stronger competitive position and has several initiatives underway to achieve this objective. Our SG&A and purchasing efforts are already yielding significant results. Likewise, we remain focused on cost control and capital expenditure discipline. We are committed to free cash flow generation and intend to exit the downturn with a more modern and capable fleet; a focused, streamlined, more effective organization; and a stronger balance sheet with more financial flexibility."

Summary and Outlook

Petrello concluded, "Looking ahead, although we expect the third quarter to reflect another decrease in our results, we also believe it may represent the bottom in most areas outside of the U.S. Lower 48. New rig startups internationally combined with fourth quarter seasonal upticks in Alaska and Canada should serve to mitigate some of the impact of further pricing erosion in the U.S. Lower 48 as contracts continue to roll to lower spot-market pricing. We believe it is likely that current market conditions will prevail for an extended period, particularly in North America. While our international markets will be more resilient, especially in the Middle East and North Africa, we will remain diligent in our cost-containment efforts. For the full year, we still expect to achieve substantially higher results in our International and Alaska operations compared to 2014."

About Nabors 

The Nabors companies own and operate approximately 469 land drilling rigs throughout the world. Nabors' actively marketed offshore fleet consists of six jackups and 36 platform rigs in the United States and multiple international markets. Nabors also manufactures top drives and drilling instrumentation systems. Nabors participates in most of the significant oil and gas markets in the world. 

nabors.com

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