Nabors Announces Second Quarter Results

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(In thousands, except per share amounts)

2016

2015

2016

2016

2015

Revenues and other income:

Operating revenues 

$  571,591

$ 863,305

$  597,571

$ 1,169,162

$ 2,278,012

Earnings (losses) from unconsolidated affiliates

(54,769)

(1,116)

(167,151)

(221,920)

5,386

Investment income (loss)

270

1,181

343

613

2,150

      Total revenues and other income

517,092

863,370

430,763

947,855

2,285,548

Costs and other deductions:

Direct costs

341,279

488,522

365,023

706,302

1,408,132

General and administrative expenses

56,624

75,810

62,334

118,958

191,240

Research and engineering

8,180

10,480

8,162

16,342

22,183

Depreciation and amortization

218,913

218,196

215,818

434,731

499,215

Interest expense

45,237

44,469

45,730

90,967

91,070

Other, net

74,607

1,338

182,404

257,011

(54,504)

      Total costs and other deductions

744,840

838,815

879,471

1,624,311

2,157,336

Income (loss) from continuing operations before income taxes

(227,748)

24,555

(448,708)

(676,456)

128,212

Income tax expense (benefit)

(41,183)

66,445

(52,064)

(93,247)

45,740

Income (loss) from continuing operations, net of tax

(186,565)

(41,890)

(396,644)

(583,209)

82,472

Income (loss) from discontinued operations, net of tax

(984)

5,025

(926)

(1,910)

4,208

Net income (loss)

(187,549)

(36,865)

(397,570)

(585,119)

86,680

     Less: Net (income) loss attributable to noncontrolling interest

2,899

44

(724)

2,175

133

Net income (loss) attributable to Nabors

$(184,650)

$ (36,821)

$(398,294)

$  (582,944)

$      86,813

Earnings (losses) per share:

   Basic from continuing operations

$         (.65)

$        (.14)

$       (1.41)

$         (2.06)

$             .28

   Basic from discontinued operations

-

.01

-

(.01)

.02

    Basic

$         (.65)

$        (.13)

$       (1.41)

$         (2.07)

$             .30

   Diluted from continuing operations

$         (.65)

$        (.14)

$       (1.41)

$         (2.06)

$             .28

   Diluted from discontinued operations

-

.01

-

(.01)

.02

    Diluted

$         (.65)

$        (.13)

$       (1.41)

$         (2.07)

$             .30

Weighted-average number   

   of common shares outstanding:

   Basic 

276,550

286,085

275,851

276,201

285,723

   Diluted 

276,550

286,085

275,851

276,201

286,701

Adjusted EBITDA (1)

$  165,508

$ 288,493

$  162,052

$    327,560

$    656,457

Adjusted operating income (loss) (2)

$   (53,405)

$   70,297

$   (53,766)

$  (107,171)

$    157,242

(1)

Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the consolidated company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our industry may compute these measures differently.  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".

(2)

Adjusted operating income (loss) is computed by subtracting the sum of direct costs, general and administrative expenses, research and engineering expenses and depreciation and amortization from operating revenues. Adjusted operating income (loss) is a non-GAAP measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the consolidated company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect our ongoing profitability and performance. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our industry may compute these measures differently.  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

June 30,

March 31,

December 31, 

(In thousands)

2016

2016

2015

(Unaudited)

ASSETS

Current assets:

Cash and short-term investments

$    255,856

$    221,501

$        274,589

Accounts receivable, net

504,099

594,506

784,671

Assets held for sale

86,608

80,100

75,678

Other current assets

344,680

363,280

340,959

     Total current assets

1,191,243

1,259,387

1,475,897

Property, plant and equipment, net

6,765,257

6,942,315

7,027,802

Goodwill

167,275

167,217

166,659

Investment in unconsolidated affiliates

888

94,657

415,177

Other long-term assets

531,642

486,755

452,305

     Total assets

$ 8,656,305

$ 8,950,331

$     9,537,840

LIABILITIES AND EQUITY

Current liabilities:

Current debt

$           175

$        5,880

$             6,508

Other current liabilities

868,000

865,388

999,991

     Total current liabilities

868,175

871,268

1,006,499

Long-term debt

3,503,172

3,584,402

3,655,200

Other long-term liabilities

562,260

578,464

582,273

     Total liabilities

4,933,607

5,034,134

5,243,972

Equity:

Shareholders' equity

3,715,850

3,904,320

4,282,710

Noncontrolling interest

6,848

11,877

11,158

     Total equity

3,722,698

3,916,197

4,293,868

     Total liabilities and equity

$ 8,656,305

$ 8,950,331

$     9,537,840

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

Six Months Ended

June 30,

March 31,

June 30,

(In thousands, except rig activity)

2016

2015

2016

2016

2015

Operating revenues:

    Drilling & Rig Services: 

      U.S.

$ 140,342

$ 321,169

$  148,676

$    289,018

$    774,990

      Canada

6,617

21,413

17,494

24,111

79,253

      International

401,024

458,545

401,055

802,079

897,706

      Rig Services (1)

39,248

100,599

53,853

93,101

244,683

       Subtotal Drilling & Rig Services

587,231

901,726

621,078

1,208,309

1,996,632

    Completion & Production Services:

      Completion Services

-

-

-

-

207,860

      Production Services

-

-

-

-

158,512

       Subtotal Completion & Production Services

-

-

-

-

366,372

    Other reconciling items (2)

(15,640)

(38,421)

(23,507)

(39,147)

(84,992)

      Total operating revenues

$ 571,591

$ 863,305

$  597,571

$ 1,169,162

$ 2,278,012

Adjusted EBITDA: (3)

    Drilling & Rig Services: 

      U.S.

$   52,878

$ 136,499

$    51,235

$    104,113

$    324,244

      Canada

360

3,732

2,122

2,482

22,200

      International

150,618

177,310

148,309

298,927

372,099

      Rig Services (1)

(10,433)

6,341

(1,481)

(11,914)

27,924

       Subtotal Drilling & Rig Services

193,423

323,882

200,185

393,608

746,467

    Completion & Production Services:

      Completion Services

-

-

-

-

(28,110)

      Production Services

-

-

-

-

23,043

       Subtotal Completion & Production Services

-

-

-

-

(5,067)

    Other reconciling items (4)

(27,915)

(35,389)

(38,133)

(66,048)

(84,943)

      Total adjusted EBITDA

$ 165,508

$ 288,493

$  162,052

$    327,560

$    656,457

Adjusted operating income (loss): (5)

    Drilling & Rig Services: 

      U.S.

$ (48,328)

$   31,445

$   (47,559)

$    (95,887)

$    108,483

      Canada

(10,831)

(8,268)

(7,278)

(18,109)

(1,910)

      International

53,859

83,571

46,872

100,731

182,373

      Rig Services (1)

(19,657)

(1,575)

(10,644)

(30,301)

11,298

       Subtotal Drilling & Rig Services

(24,957)

105,173

(18,609)

(43,566)

300,244

    Completion & Production Services:

      Completion Services

-

-

-

-

(55,243)

      Production Services

-

-

-

-

(3,559)

       Subtotal Completion & Production Services

-

-

-

-

(58,802)

    Other reconciling items (4)

(28,448)

(34,876)

(35,157)

(63,605)

(84,200)

   Total adjusted operating income (loss)

$ (53,405)

$   70,297

$   (53,766)

$  (107,171)

$    157,242

Earnings (losses) from unconsolidated affiliates (6)

$ (54,769)

$   (1,116)

$(167,151)

$  (221,920)

$        5,386

Rig activity:

Rig years: (7)

   U.S.

53.7

119.5

64.9

59.3

143.4

   Canada

4.2

9.7

12.5

8.3

17.6

   International (8)

101.2

127.1

110.5

105.9

128.6

      Total rig years 

159.1

256.3

187.9

173.5

289.6

Rig hours: (9)

   U.S. Production Services

-

-

-

-

129,652

   Canada Production Services

-

-

-

-

23,947

      Total rig hours

-

-

-

-

153,599

(1)

Includes our other services comprised of our drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software services.

(2)

Represents the elimination of inter-segment transactions.

(3)

Adjusted EBITDA is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the consolidated company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our industry may compute these measures differently.  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".

(4)

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

(5)

Adjusted operating income (loss) is computed by subtracting the sum of direct costs, general and administrative expenses, research and engineering expenses and depreciation and amortization from operating revenues. Adjusted operating income (loss) is a non-GAAP measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the consolidated company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect our ongoing profitability and performance.  In addition, securities analysts and investors use this measure as one of the metrics on which they analyze our performance.  Other companies in our industry may compute these measures differently.  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 our share of the net income (loss), as adjusted for our basis difference, of our unconsolidated affiliates accounted for by the equity method, including losses of $54.8 million, $.8 million and $167.1 million for the three months ended June 30, 2016 and 2015 and March 31, 2016, respectively, and $221.9 million and $.8 million for the six months ended June 30, 2016 and 2015 related to our share of the net loss of C&J, which we report on a quarter lag.

(7)

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.

(8)

International rig years includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates, which totaled 2.5 years during the three months ended March 31, 2015.  As of May 24, 2015, this was no longer an unconsolidated affiliate.

(9)

Rig hours represents the number of hours that our well-servicing rig fleet operated during the period. This fleet was included in the Completion & Production Services business that was merged with C&J Energy Services, Inc. in March 2015 and we will therefore no longer report this performance metric.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO 

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

(In thousands)

2016

2015

2016

2016

2015

Adjusted EBITDA

$  165,508

$ 288,493

$  162,052

$  327,560

$ 656,457

Depreciation and amortization 

(218,913)

(218,196)

(215,818)

(434,731)

(499,215)

Adjusted operating income (loss)

(53,405)

70,297

(53,766)

(107,171)

157,242

Earnings (losses) from unconsolidated affiliates

(54,769)

(1,116)

(167,151)

(221,920)

5,386

Investment income (loss)

270

1,181

343

613

2,150

Interest expense

(45,237)

(44,469)

(45,730)

(90,967)

(91,070)

Other, net

(74,607)

(1,338)

(182,404)

(257,011)

54,504

Income (loss) from continuing operations before income taxes

$(227,748)

$   24,555

$(448,708)

$(676,456)

$ 128,212

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

June 30,

March 31,

December 31, 

(In thousands)

2016

2016

2015

(Unaudited)

Current debt

$           175

$        5,880

$             6,508

Long-term debt

3,503,172

3,584,402

3,655,200

     Total Debt

3,503,347

3,590,282

3,661,708

Less: Cash and short-term investments

255,856

221,501

274,589

     Net Debt

$ 3,247,491

$ 3,368,781

$     3,387,119

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) ITEMS EXCLUDING CERTAIN NON-CASH CHARGES AND OTHER NON-OPERATIONAL ITEMS (NON-GAAP)

(Unaudited)

Charges and Non-Operational

As adjusted

(In thousands, except per share amounts)

Actuals

Items

(Non-GAAP)

Three Months Ended June 30, 2016

Income (loss) from continuing operations, net of tax

$ (186,565)

$   (111,561)

$     (75,004)

Diluted earnings (losses) per share from continuing operations

$        (0.65)

$         (0.39)

$          (0.26)

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SCHEDULE OF NON-CASH CHARGES AND OTHER NON-OPERATIONAL ITEMS (NON-GAAP)

(Unaudited)

Three Months Ended

June 30,

Per Diluted

(In thousands, except per share amounts)

2016

Share

           Equity-method investment impairments and losses (1)

$      95,784

$       .34

           Other impairments and losses (2)

$      15,777

$       .05

Total Adjustments, net of tax

$    111,561

(1)

Represents impairments to the carrying value of our C&J holdings and earnings (losses) from unconsolidated affiliates, which represents our proportionate share of C&J's losses from the prior quarter, net of tax of $1.9 million.

(2)

Represents impairments and losses related to disposed businesses and assets, net of tax of $7.7 million.