Key Takeaways NBR's shares fell 12.4% in a year while the broader Oil and Energy sector posted gains.NBR faces EBITDA declines, Lower 48 rig pressure, severe volatility and collection issues in Mexico.High capex, breakeven free cash flow and reliance on asset sales underscore NBR's near-term strain.Over the past 12 months, Nabors Industries Ltd.  (NBR) has notably underperformed its peers and relevant benchmarks. NBR's shares declined 12.4%, while other companies in the Oil and Gas – Drilling sub-industry s ...

Miller Value Partners, an investment management company, released its “Deep Value Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The market rebound that began in April continued in the third quarter. Growth and momentum stocks continued to perform well, delivering double-digit returns, while the market began to broaden. Small and micro-cap value stocks achieved their best quarterly returns since Q4 2023. In the quarter, the Deep Value strategy appreciated by +26.5 ...

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Core Insights - Nabors Industries Ltd. has received credit rating upgrades from two major agencies, reflecting the company's efforts to improve its balance sheet and reduce debt [1][4]. Group 1: Credit Ratings Actions - S&P Global Ratings upgraded Nabors' issuer credit rating to 'B' from 'B-' with a stable outlook and assigned a 'B+' rating to the recently issued Senior Priority Guaranteed Notes (SPGN) [4]. - Fitch Ratings also upgraded Nabors' Long Term Issuer Default Rating to 'B' from 'B-' with a stable outlook and assigned a 'BB-' rating to the recently issued SPGN [4]. - Moody's Investors Service assigned a rating of 'Ba3' to Nabors' recent SPGN issue, consistent with its rating on existing SPGN [4]. Group 2: Company Performance and Strategy - The company has made significant progress in deleveraging and strengthening its balance sheet, which has been recognized by credit rating agencies [2]. - Nabors aims to leverage its core competencies in drilling, engineering, automation, data science, and manufacturing to innovate in the energy sector and support the transition to a lower-carbon world [2].

Core Viewpoint - Nabors Industries Ltd. has successfully priced $700 million in senior priority guaranteed notes due 2032, up from an initially announced $550 million, with an interest rate of 7.625% [1][2]. Group 1: Offering Details - The offering of the notes was upsized to $700 million from $550 million, with an annual interest rate of 7.625% and an initial offering price of 100% of par [1]. - The notes will be fully guaranteed by Nabors and certain indirect wholly-owned subsidiaries, ranking pari passu with existing senior priority guaranteed notes [2]. - The expected net proceeds from the offering are approximately $690.2 million after deducting discounts to initial purchasers [1]. Group 2: Use of Proceeds - Nabors intends to use the net proceeds to redeem approximately $546.1 million of outstanding 7.375% senior priority guaranteed notes due 2027, with the remaining funds allocated for general corporate purposes [3]. Group 3: Regulatory and Offering Conditions - The notes will be offered to qualified institutional buyers under Rule 144A and to persons outside the U.S. under Regulation S, without registration under the Securities Act [4]. - The offering will not be registered in any jurisdiction outside the U.S., and no steps will be taken to permit the offer in jurisdictions requiring registration [4].

Core Viewpoint - Nabors Industries Ltd. has announced an offering of $550 million senior priority guaranteed notes due 2032, which will be fully guaranteed by Nabors and certain subsidiaries [1][2]. Group 1: Offering Details - The notes will be senior unsecured obligations of Nabors Industries, Inc. and will rank equally with existing senior priority guaranteed notes due 2030 [2]. - The offering will be made to qualified institutional buyers under Rule 144A and to persons outside the U.S. under Regulation S [4]. - The notes will not be registered under the Securities Act and cannot be offered or sold in the U.S. without an exemption [4]. Group 2: Use of Proceeds - Nabors intends to use the net proceeds from the offering, along with cash on hand, to redeem approximately $546.1 million of outstanding 7.375% senior priority guaranteed notes due 2027 [3]. Group 3: Company Background - Nabors Industries is a leading provider of advanced technology for the energy industry, operating in over 20 countries and focusing on safe, efficient, and responsible energy production [7].

Core Viewpoint - Nabors Industries Ltd. announced that its land drilling joint venture SANAD in Saudi Arabia will resume operations for two rigs that had been temporarily suspended, with expected return dates in March 2026 and June 2026, respectively. The contracts for these rigs have been extended to match the duration of their suspension [1][2]. Company Overview - Nabors Industries is a leading provider of advanced technology for the energy industry, operating in over 20 countries. The company focuses on delivering safe, efficient, and responsible energy production through its expertise in drilling, engineering, automation, data science, and manufacturing [2]. Market Position - SANAD is recognized as the largest land drilling contractor in Saudi Arabia, playing a crucial role in the development of the Kingdom's energy resources. The resumption of rig operations is seen as a positive development in this significant market [2].

Financial Performance - Operating revenues for the three months ended September 30, 2025, totaled $818.2 million, an increase of $86.4 million compared to the same period in 2024[139]. - Net income attributable to Nabors for the three months ended September 30, 2025, was $274.2 million ($16.85 per diluted share), a $330.0 million increase from a net loss of $55.8 million ($6.86 per diluted share) in the same period of 2024[140]. - Operating revenues for the nine months ended September 30, 2025 totaled $2.4 billion, an increase of $186.9 million compared to the same period in 2024[152]. - Net income attributable to Nabors was $276.3 million ($17.54 per diluted share) for the nine months ended September 30, 2025, a $398.7 million increase from a net loss of $122.4 million in 2024[153]. Segment Performance - Operating revenues for the U.S. Drilling segment decreased by $4.9 million or 2% during the three months ended September 30, 2025, compared to the prior year[144]. - Operating revenues for the International Drilling segment increased by $38.6 million or 10% during the same period, primarily due to acquired Parker rig operations[145]. - Operating revenues for the Drilling Solutions segment increased by $62.4 million or 78% during the three months ended September 30, 2025, attributed to acquired Parker operations[146]. - Operating revenues for the Rig Technologies segment decreased by $10.2 million or 22% during the same period due to an overall decline in activity[147]. - U.S. Drilling segment operating revenues decreased by $50.5 million, or 6%, to $736.0 million for the nine months ended September 30, 2025[156]. - International Drilling segment operating revenues increased by $99.2 million, or 9%, totaling $1.17 billion for the nine months ended September 30, 2025[158]. - Drilling Solutions segment operating revenues increased by $167.3 million, or 70%, totaling $405.4 million for the nine months ended September 30, 2025[159]. - Rig Technologies segment operating revenues decreased by $29.2 million, or 20%, totaling $116.3 million for the nine months ended September 30, 2025[160]. Expenses and Income - General and administrative expenses for the three months ended September 30, 2025, were $77.1 million, reflecting a 20% increase compared to the same period in 2024[141]. - General and administrative expenses increased by $40.4 million, or 22%, totaling $228.3 million for the nine months ended September 30, 2025[154]. - Interest expense for the three months ended September 30, 2025, was $54.3 million, a decrease of 2% compared to the same period in 2024[148]. - Interest expense for the nine months ended September 30, 2025 was $164.7 million, an increase of $7.5 million, or 5%, compared to the same period in 2024[161]. Gains and Dispositions - Gain on the disposition of Quail Tools was $415.6 million for the three months ended September 30, 2025, compared to zero in the same period of 2024[149]. - Gain on disposition of Quail Tools was $415.6 million for the nine months ended September 30, 2025, compared to zero in 2024[162]. - Gain on bargain purchase related to the Parker acquisition was $116.5 million for the nine months ended September 30, 2025, compared to zero in 2024[163]. Cash Flow and Commitments - Net cash provided by operating activities was $447.4 million for the nine months ended September 30, 2025, compared to $432.5 million for the same period in 2024[188]. - Cash from operating results (before working capital changes) decreased to $461.9 million for the nine months ended September 30, 2025, down from $512.9 million in the corresponding 2024 period[188]. - Net cash used by investing activities was $44.4 million during the nine months ended September 30, 2025, significantly lower than $353.2 million in the same period of 2024[189]. - The company repaid $177.8 million of the Parker term loan and $164.4 million of outstanding long-term debt during the nine months ended September 30, 2025[190]. - As of September 30, 2025, outstanding purchase commitments totaled approximately $464.9 million, primarily for capital expenditures and inventory purchases[182]. - Changes in working capital items used $14.5 million in cash flows during the nine months ended September 30, 2025, a favorable change compared to $80.4 million used in the same period of 2024[188]. Future Outlook - The company expects its current cash and investments, along with projected cash flows, to adequately finance its commitments and expenditures for at least the next 12 months[181]. - The company may seek to retire or purchase outstanding debt depending on market conditions and liquidity requirements[184]. - There were no material changes in the company's exposure to market risk during the nine months ended September 30, 2025[195].

Core Insights - Nabors Industries Ltd. (NBR) reported a third-quarter 2025 adjusted loss of $3.67 per share, which was wider than the Zacks Consensus Estimate of a loss of $2.37 and also greater than the prior year's loss of $3.35 per share [1][10] - Operating revenues for NBR were $818.2 million, missing the Zacks Consensus Estimate of $842 million but increasing from $731.8 million in the year-ago quarter, driven by stronger contributions from International Drilling and Drilling Solutions segments [2][10] - Adjusted EBITDA rose to $236.3 million from $221.7 million year-over-year but fell short of the model estimate of $270.8 million [3] Segment Performance - U.S. Drilling generated operating revenues of $249.8 million, down 1.9% from $254.8 million in the prior year, but exceeded the model estimate of $226.4 million. Operating profit was $31.4 million, down from $41.7 million year-over-year and below the estimated profit of $47.2 million [4] - International Drilling's operational revenues increased to $407.2 million from $368.6 million a year ago, surpassing the estimate of $399.5 million. Operating profit rose to $45.5 million from $32.2 million, beating the estimate of $38.1 million [5] - Revenues from the Drilling Solutions segment totaled $141.9 million, up 78.4% from $79.5 million in the prior year, but missed the estimate of $160.9 million. Operating income increased to $50 million from $29.2 million, aligning with the estimate [6] - Rig Technologies reported revenues of $35.6 million, down 22.3% from $45.8 million in the prior year, missing the estimate of $53.7 million. Operating profit was $0.9 million, down from $2.8 million year-over-year and below the estimate of $4.1 million [7] Financial Position - Total costs and expenses decreased to $405.5 million from $766.3 million in the year-ago quarter, also lower than the prediction of $810.4 million. As of September 30, 2025, NBR had $428.1 million in cash and short-term investments [8] - Long-term debt stood at approximately $2.3 billion, with a debt-to-capitalization ratio of 80.2%. Capital expenditures totaled $202.3 million during the same period [9] Guidance - For Q4 2025, NBR anticipates a U.S. Drilling rig count of 57 to 59 rigs, with a daily adjusted gross margin of approximately $13,000. Combined adjusted EBITDA for Alaska and the Gulf of America is projected to reach around $25 million [11] - International operations are expected to have an average rig count of approximately 91 rigs, with a daily adjusted gross margin estimated at $18,100-$18,200. Adjusted EBITDA for the Drilling Solutions segment is projected at approximately $39 million, while Rig Technologies' adjusted EBITDA is expected to be around $5 million to $6 million [12] - Capital expenditures for Q4 2025 are planned between $180 million and $190 million, with about $90-$95 million allocated for new builds in Saudi Arabia [13] - NBR expects adjusted free cash flow for Q4 2025 to be around $10 million, with full-year adjusted free cash flow anticipated to be breakeven, a significant change from the earlier guidance of $80 million due to the Quail divestiture and outstanding collections from PEMEX related to 2024 [14]

Financial Data and Key Metrics Changes - Consolidated revenue for the third quarter was $818.2 million, a decrease of $14.6 million or 1.8% sequentially, primarily due to the divestiture of Quail Tools [40] - Adjusted EBITDA totaled $236.3 million, representing an EBITDA margin of 28.9%, down 96 basis points sequentially [41] - Net debt stood at approximately $1.7 billion, the lowest level in over ten years, reflecting a reduction of more than 20% this year [9][61] Business Line Data and Key Metrics Changes - International drilling revenue increased by $22.3 million or 5.8% sequentially to $407.2 million, with EBITDA for the segment rising by $10 million or 8.5% to $127.6 million [43][44] - U.S. drilling revenue decreased by 2.2% to $249.8 million, with EBITDA down 7.5% to $94.2 million, primarily due to a decline in average rig count [45][46] - Drilling Solutions segment generated revenue of $141.9 million and EBITDA of $60.7 million, resulting in a 42.7% margin [48] Market Data and Key Metrics Changes - The average rig count in the International Drilling segment increased by more than three rigs to 89, with a quarter-end exit rig count of 91 [44] - In the U.S. Lower 48, the average rig count declined by 3.2 rigs to 59.2, with a recent count of 59 rigs [46][20] - The gas-directed industry rig count in the Lower 48 has increased, indicating a positive outlook for natural gas activity [15] Company Strategy and Development Direction - The company aims to reduce gross debt and improve balance sheet leverage, with a focus on capital structure transformation following the sale of Quail Tools [38][63] - The integration of Parker Wellbore is progressing well, expected to produce approximately $55 million of EBITDA in 2025, including synergies [53] - The company is committed to deploying proceeds from asset sales to further reduce debt and enhance financial flexibility [61] Management's Comments on Operating Environment and Future Outlook - Management noted mixed effects on global drilling markets due to geopolitical factors and oil price fluctuations, with expectations for U.S. activity to stabilize and potentially increase in late 2026 [14][16] - The outlook for natural gas remains constructive, driven by expected U.S. LNG exports and large-scale developments in the Middle East and Latin America [15] - Management expressed confidence in the performance outlook for the coming quarters, supported by improved operational efficiencies and cost synergies [10][12] Other Important Information - The company completed the sale of Quail Tools for $625 million, significantly impacting its capital structure and enabling debt reduction [6][60] - Adjusted free cash flow for the third quarter was $6 million, with expectations for approximately $10 million in the fourth quarter [56][57] - The company plans to maintain capital expenditures in the range of $715 million to $725 million for the year, with a focus on newbuild programs [55] Q&A Session Summary Question: Insights on U.S. Lower 48 activity trends - Management noted that daily revenue increased sequentially by about $500 due to performance bonuses, with a focus on ensuring more of this revenue drops to the bottom line [69][70] Question: Saudi onshore activity and tendering - Management indicated that around 50% of suspended rigs may return to work, with ongoing participation in tenders for their rigs [75][76] Question: Philosophy around Aramco's new tenders - Management acknowledged that while there are no significant changes in rig requirements, there is an interest in introducing more technology and automation in operations [82][86] Question: Future leverage levels and cash flow generation - Management expects to reduce gross debt significantly and aims for net debt to reach around $1.1 billion to $1.2 billion, with strong cash flow generation anticipated from the rest of the business [90][92]