2016-04-26 19:45:00
NABORS NET LOSS $398.3 MLN
HAMILTON, Bermuda, April 25, 2016 -- Nabors Industries Ltd. ("Nabors") (NYSE: NBR) today reported first quarter 2016 operating revenues of $597.6 million, compared to operating revenues of $738.9 million in the fourth quarter of last year. Net income (loss) from continuing operations for the quarter was a loss of $396.6 million, or ($1.41) per diluted share, compared to a loss of $161.1 million, or ($0.57) per diluted share, last quarter. The net loss from continuing operations for the first quarter included a per share loss of $1.12 per share due to impairments to the carrying value of the Company's investment in C&J Energy Services, Ltd. ("C&J") (NYSE: CJES) and from our proportionate share of C&J losses from the prior quarter, as such losses are accounted for on a quarter lag basis.
Anthony Petrello, Nabors' Chairman, President, and CEO, commented, "Our first quarter results reflect the continued strain from low commodity prices. In particular, the first quarter's drop in oil prices below $30 led to sharp reductions in customer spending plans on a worldwide basis and had a corresponding adverse impact on our results. In the U.S., our customers' swift reaction to commodity price drops resulted in a roughly equal impact on both rig years and margins. Internationally, a reduction of seven rig years combined with other unfavorable factors resulted in lower operating cash flows for the quarter. Additionally, the Canada market's typical seasonal uptick in the first quarter failed to materialize this year due to market conditions. Despite these reductions in cash flows, we still modestly reduced net debt during the quarter while continuing to fund the innovative technological initiatives that will best position Nabors for the eventual upturn."
Segment Results
Quarterly adjusted operating income ("adjusted income") in Drilling and Rig Services decreased to a loss of $18.6 million from a profit of $29.9 million in the fourth quarter of last year. Quarterly adjusted EBITDA in this business line decreased sequentially to $200.2 million, a 23% decline of which the majority was attributable to the U.S. drilling segment. For the quarter, the Company averaged 187.9 rigs operating at an average gross margin of $13,407 per rig day, compared to 222.9 rigs at $14,229 per rig day in the fourth quarter of last year. The Company expects additional declines in near-term volume and pricing as the weak commodity price environment persists and customer spending continues to adjust to their reduced budget levels.
International adjusted income decreased by 10% sequentially to $46.9 million, primarily due to a reduction of seven rig years, additional pricing concessions, and unfavorable cost impacts and rig moving activity. Quarterly adjusted EBITDA in this segment decreased by 8% sequentially to $148.3 million. Compared to the first quarter, the Company expects moderately decreasing quarterly income in the near term as activity declines. In Canada, where the first quarter is traditionally the strongest, rig years declined 13% from the fourth quarter with future results expected to remain challenged.
The U.S. Drilling segment posted an adjusted operating loss of $47.6 million during the quarter, reflecting further activity declines and margin erosion as term contracts expire. The Lower 48 saw 30% fewer rigs working compared to the fourth quarter of last year, for an average rig count of 54. At current commodity prices, the Company anticipates the rig count to stabilize mid-year but expects further deterioration in average margins in the near-term. Should market fundamentals push oil prices comfortably into the $50's, rig activity could improve.
Rig Services, which consists of the Company's manufacturing, directional drilling, and complementary services, reported an adjusted loss of $10.6 million, a $2.9 million improvement from the fourth quarter due to cost savings. While market fundamentals continue to provide minimal upside for new equipment and services at this time, Nabors remains encouraged about the future potential of this segment with its focus on technology and automation.
William Restrepo, Nabors' Chief Financial Officer, stated, "We continue to focus on maintaining our liquidity and enhancing operational performance during these challenged times. Though the quarter's results declined materially from the previous quarter, we were able to slightly reduce net debt through a combination of continued execution of stringent cost control and disciplined capital spending. During the quarter, we repurchased $154.1 million of Nabors senior unsecured notes at a modest discount for an estimated net annual interest expense savings of $7 million. As a result of the continued deterioration of industry conditions, we made the decision to impair our carrying value in C&J to better reflect the market value of our equity position.
"Despite a recent upturn in the price of oil, at its current level, we anticipate further near-term reductions in rig count both internationally and in the U.S. We also expect margins to deteriorate, particularly in the Lower 48 market. Though low oil prices have had increasing spill-over effects on our international business, Nabors remains uniquely well positioned to weather the storm given our ongoing cash flow from international operations and strong liquidity."
Mr. Petrello concluded, "We continue to execute on our cost reduction initiatives and to move forward with our vision of the rig serving as the central platform for all drilling services and future innovation. We expect our technological advances to give Nabors a sustainable competitive advantage by drilling wells with greater efficiency, safety, and accuracy in every one of our markets."
NABORS INDUSTRIES LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
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|
Three Months Ended |
||
|
|
March 31, |
December 31, |
|
|
(In thousands, except per share amounts) |
2016 |
2015 |
2015 |
|
|
|
|
|
|
Revenues and other income: |
|
|
|
|
Operating revenues |
$ 597,571 |
$ 1,414,707 |
$ 738,872 |
|
Earnings (losses) from unconsolidated affiliates |
(167,151) |
6,502 |
(45,367) |
|
Investment income (loss) |
343 |
969 |
180 |
|
Total revenues and other income |
430,763 |
1,422,178 |
693,685 |
|
|
|
|
|
|
Costs and other deductions: |
|
|
|
|
Direct costs |
365,023 |
919,610 |
445,130 |
|
General and administrative expenses |
62,334 |
115,430 |
61,056 |
|
Research and engineering |
8,162 |
11,703 |
9,354 |
|
Depreciation and amortization |
215,818 |
281,019 |
231,137 |
|
Interest expense |
45,730 |
46,601 |
46,410 |
|
Other, net |
182,404 |
(55,842) |
1,011 |
|
Impairments and other charges |
- |
- |
123,557 |
|
Total costs and other deductions |
879,471 |
1,318,521 |
917,655 |
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
(448,708) |
103,657 |
(223,970) |
|
|
|
|
|
|
Income tax expense (benefit) |
(52,064) |
(20,705) |
(62,880) |
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
(396,644) |
124,362 |
(161,090) |
|
Income (loss) from discontinued operations, net of tax |
(926) |
(817) |
(1,730) |
|
|
|
|
|
|
Net income (loss) |
(397,570) |
123,545 |
(162,820) |
|
Less: Net (income) loss attributable to noncontrolling interest |
(724) |
89 |
(834) |
|
Net income (loss) attributable to Nabors |
$ (398,294) |
$ 123,634 |
$ (163,654) |
|
|
|
|
|
|
Earnings (losses) per share: |
|
|
|
|
Basic from continuing operations |
$ (1.41) |
$ .43 |
$ (.57) |
|
Basic from discontinued operations |
- |
- |
(.01) |
|
Basic |
$ (1.41) |
$ .43 |
$ (.58) |
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