Nabors Industries (NYSE: NBR) reported Q2 EPS of ($22.13), $2.52 better than the analyst estimate of ($24.65). Revenue for the quarter came in at $533.93 million versus the consensus estimate of $536.9 million.

Anthony G. Petrello, Nabors Chairman, CEO and President, commented, "As we adjusted to the steep activity decline, Nabors delivered strong results in the second quarter, driven by increased market share and strong margins in the Lower 48, resilience in our International business and improved results in our Rig Technologies segment. In addition, we slashed our overhead expenses and capital spending, while making notable progress on our priorities to generate free cash flow and reduce net debt. At the same time, our global team remains focused on minimizing the impact of the pandemic on our employees and on our operations.

"The second quarter operating performance reflected significant activity declines in North America, as operators completed the bulk of their plans to reduce drilling. In the U.S. Lower 48, we lowered our costs swiftly in response to customer actions. Our daily rig margins remained at high levels despite some weakening in our average dayrates for the fleet.

"In our International Drilling segment, rig count declined by 4.3 rigs, a 5% reduction. In addition to the situation in Venezuela, where our main customer exited the market, various customers responded to the global drop in demand by adjusting their drilling plans. As well, strict COVID lockdowns in Latin America resulted in reduced dayrates during the lockdown periods. Nonetheless, adjusted EBITDA held up well, as we benefitted from significant early termination revenue.

"Although activity in the Lower 48 seems close to a bottom, the full impact of pricing reductions on average fleet margins still lies ahead. In addition, as is usually the case, activity trends in most international markets lag the U.S. We expect international rig count and pricing to continue falling over the remainder of the year, though not as steeply as the industry has experienced in the Lower 48.

"In this environment, we will remain focused on cost and capital discipline. We will ensure our direct and overhead costs, as well as our capital expenditures, are as aligned as much as possible to our activity levels."

William Restrepo, Nabors CFO, stated, "Nabors' adjusted EBITDA and cash generation, despite the adverse environment, demonstrated the Company's resilience. Looking ahead, we expect further deterioration in the domestic and international markets. As such, we have increased our efforts to continue delivering our goals. We remain committed to meaningfully reduce our net debt in 2020.

"Our overhead costs were cut significantly below the first-quarter levels, exceeding our initial targets. G&A, R&E and field support expenses totaled $89.1 million in the second quarter as compared to $118.9 million in the prior quarter, a 25% reduction. We expect those costs to fall just below $80 million in the third quarter and remain at those levels in the fourth, a 33% reduction as compared to the first quarter. The full year 2020 should be $145 million dollars below the prior year, a 28% year-on-year reduction.

"During the second quarter, we purchased approximately $187 million of our shorter-term notes in the open market at a discount to par. The remaining balances of our 2020 and 2021 senior notes now stand at $139 million and $154 million, respectively. At June 30, our balances of cash and cash equivalents plus our undrawn credit facility totaled nearly $925 million."

Mr. Petrello concluded, "Our commitment to generate free cash flow and reduce net debt this year is unwavering. We continue to evaluate all aspects of the Company with the goal of streamlining our operating processes.

"We will continue to drive technology and performance in the drilling sector. We firmly believe that the future of our industry and the Company's success will be determined by our ability to continue automating the drilling process and integrating the relevant services onto our leading-edge rig platform. At the same time, we are positioning the Company to capitalize on several far-reaching transformations which are currently underway in our industry. The recent launch of our RigCloud® digital platform, for streaming analytics and improving rig and operational performance, is a key element of our digitalization strategy. These initiatives will allow us to further improve performance, enhance placement and quality of the wellbore, reduce well cost and enable remote operations with fewer people at risk on the well site.

"We spent the last several years focusing our value proposition on the group of operators we thought most capable of sustaining scale in their markets. These operators demand industry-leading rig capabilities, performance, and advanced technology. Our track record across these dynamics has established Nabors as the leading provider of drilling services to these customers. This strong position will serve us well as we emerge from this downturn.

"I would again like to thank our employees for their hard work in this trying environment. I remain confident that their commitment and perseverance will be rewarded in the recovery."

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