Nabors Industries (NBR) Reschedules Q4 Release; Notes C&J Services (CJES) Deal
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Nabors Industries (NYSE: NBR) announced it has rescheduled its earnings release for the fourth quarter and full year ended December 31, 2014 to allow additional time for completion and review of its financial statements. The release will now coincide with the filing of its annual report on Form 10-K, which will be made on March 2, 2015. The delay is attributable to work related to the pending transaction with C&J Energy Services, Inc., together with an expanded audit scope primarily associated with asset and goodwill impairment testing. Nabors has also rescheduled its quarterly earnings conference call to Tuesday, March 3, 2015.
As disclosed in Nabors' Form 8-K dated February 6, 2015, the cash component of the consideration Nabors expects to receive at the closing of the pending transaction with C&J has been reduced by $250 million, from approximately $938 million to approximately $688 million. This reduction and associated changes in the deal structure were negotiated between the parties in light of the current market environment and Nabors' interest in maximizing its equity investment in the company.
The fourth quarter results will include non-cash impairments encompassing both goodwill and underutilized and obsolete assets amounting to approximately $400 million and $600 million, respectively. The preponderance of the goodwill impairments is associated with the completions business, while approximately two-thirds of the asset impairments relate to legacy rigs and associated equipment, including the workover jackups in the U.S. Drilling operations. The balance of the impaired assets consists mainly of underutilized rigs and components in its Canada and International operations, as well as certain items within Canrig's inventory. These impairments are being recorded due to the rapid reduction in oil prices, which has accelerated the decline in utilization these assets have experienced over the last several years.
Tony Petrello, Nabors Chairman and CEO, commented, "Despite the rapid deterioration in the price of crude oil and its impact on U.S. E&P activity, the financial performance of all our drilling operations improved sequentially, adjusting for a final early termination installment received by our U.S. Drilling entity in the third quarter. These improvements were primarily attributable to new rig deployments and the usual seasonal ramp-ups in Canada and Alaska. Improvements in our drilling operations were more than offset by lower results in our Rig Services operating segment and the Completion and Production Services business line. These segments experienced lower volume and some pricing deterioration during the quarter.
"We are well positioned to manage lower rig utilizations, and are taking further actions to lower operational costs and maintain financial flexibility without compromising our core capabilities. Thanks to our unique global footprint, we believe Nabors is uniquely positioned to weather this downturn while preserving opportunities for long-term growth and value creation. We are also encouraged by our continued progress in new rig awards, marked by three new build contracts secured during the quarter. These new contracts were for two PACEĀ®-X rigs and a six-year commitment for an incremental proprietary coiled tubing drilling unit on the North Slope of Alaska.
"Looking ahead, we see further improvement in our International and Alaska drilling operations, which we expect to be offset by decreases in our U.S. Lower 48 operations and smaller but significant reductions in our U.S. offshore, Canada and Rig Services operations. We foresee smaller reductions in our Completion & Production Services businesses. We still expect our International unit to improve progressively this year. However, the rate of improvement will be tempered by the weakening environment in certain markets.
"While our liquidity and financial flexibility remain strong, we are moving swiftly to reduce operating, support and capital costs in the current environment. We also recently completed two financing transactions, which together provide for $525 million in additional borrowing capacity, further bolstering our financial liquidity. We expanded our revolving line of credit by $225 million with the inclusion of two new banks and three existing relationship banks under the accordion feature of the existing agreement. This brings the total size of the facility to $1.725 billion at a current borrowing rate of LIBOR plus 130 basis points. We also established an unsecured $300 million, 3-year term LIBOR-based bank loan, at a current rate of LIBOR plus 150 basis points. The proceeds are being used to redeem outstanding short-term commercial paper as it matures. Repayment of the loan would be triggered by the receipt of the C&J Energy transaction cash proceeds."
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