Nabors(NBR) - 2025 Q1 - Quarterly Report

Part I - Financial Information Financial Statements The financial statements for the quarter ended March 31, 2025, show a significant turnaround to a net income of $57.2 million from a net loss of $9.0 million in the prior-year quarter, largely driven by a $113.0 million bargain purchase gain from the Parker Drilling acquisition. Total assets increased to $5.05 billion from $4.50 billion at year-end 2024, primarily due to the acquisition. Cash from operations was $87.7 million, a decrease from $107.2 million year-over-year, reflecting changes in working capital and lower cash from operating results before these changes Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $5.05 billion, an increase from $4.50 billion at December 31, 2024. This growth was primarily driven by an increase in Property, Plant, and Equipment and Accounts Receivable, largely resulting from the Parker acquisition. Total liabilities rose to $3.60 billion from $3.30 billion, mainly due to an increase in long-term debt. Total equity increased significantly to $649.7 million from $421.2 million, bolstered by the share issuance for the acquisition and net income for the quarter Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $1,198,818 | $999,537 | | Property, plant and equipment, net | $3,074,789 | $2,830,957 | | Total assets | $5,049,684 | $4,504,301 | | Total current liabilities | $667,645 | $571,917 | | Long-term debt | $2,685,169 | $2,505,217 | | Total liabilities | $3,604,307 | $3,297,963 | | Total equity | $649,734 | $421,247 | Condensed Consolidated Statements of Income (Loss) For the first quarter of 2025, Nabors reported a net income of $57.2 million, a significant improvement from a net loss of $9.0 million in the same period of 2024. This was primarily due to a $113.0 million gain on bargain purchase from the Parker acquisition. Operating revenues remained stable at $736.2 million. Diluted earnings per share were $2.18, compared to a loss of $4.54 per share in Q1 2024 Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating revenues | $736,186 | $733,704 | | Total revenues and other income | $742,782 | $743,905 | | Gain on bargain purchase | $(112,999) | $— | | Income (loss) before income taxes | $72,186 | $7,042 | | Net income (loss) | $57,179 | $(9,002) | | Net income (loss) attributable to Nabors | $32,988 | $(34,333) | | Diluted EPS | $2.18 | $(4.54) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $87.7 million for Q1 2025, down from $107.2 million in Q1 2024. Investing activities used $74.9 million, an improvement from $106.6 million used in the prior year, mainly due to $84.4 million in cash acquired from the Parker acquisition, which offset higher capital expenditures. Financing activities used a minimal $2.0 million, compared to a significant use of $635.1 million in Q1 2024 which included a large debt reduction Q1 2025 vs Q1 2024 Cash Flows (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $87,735 | $107,239 | | Net cash (used for) provided by investing activities | $(74,920) | $(106,629) | | Net cash (used for) provided by financing activities | $(1,958) | $(635,107) | | Net increase (decrease) in cash | $10,437 | $(640,407) | | Cash and cash equivalents, end of period | $396,470 | $412,864 | Notes to Condensed Consolidated Financial Statements The notes detail significant events and accounting policies, highlighted by the March 2025 acquisition of Parker Drilling for approximately $180.6 million, which resulted in a $113.0 million bargain purchase gain. The company also consolidated its SANAD joint venture and a special purpose acquisition company (SPAC). Debt structure was updated with a new 2024 Credit Agreement, and the Parker Term Loan was repaid. Segment performance shows revenue growth in International Drilling and Drilling Solutions, offset by a decline in U.S. Drilling - On March 11, 2025, Nabors completed the acquisition of Parker Drilling Company for consideration of $0.6 million in cash and 4.8 million common shares, valued at approximately $180.6 million[33] - The Parker acquisition was accounted for as a business combination, resulting in a bargain purchase gain of $113.0 million. This gain arose because the fair value of net assets acquired ($293.6 million) exceeded the purchase price, primarily due to a decrease in Nabors' stock price between the signing and closing dates[34][35] - The company recognized impairment charges of approximately $26.5 million related to the net carrying value of assets located in Russia during Q1 2025[20] - The SANAD joint venture with Saudi Aramco is consolidated as a variable interest entity (VIE). As of March 31, 2025, SANAD had total assets of $1.28 billion[41][44] - Nabors co-sponsored a special purpose acquisition company (SPAC), NETC II, which is consolidated as a VIE. As of March 31, 2025, the SPAC's trust account balance was $335.1 million[102][106] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports stable Q1 2025 operating revenues of $736.2 million, nearly flat year-over-year. A net income of $33.0 million attributable to Nabors marks a significant improvement from a $34.3 million loss in Q1 2024, driven by a $113.0 million bargain purchase gain from the Parker acquisition, though partially offset by impairment and transaction costs. The outlook remains cautious due to market volatility, but notes supportive oil prices for international activity. Liquidity is strong with $404.1 million in cash and investments and availability under its credit facilities. The company remains in compliance with all debt covenants - The acquisition of Parker Drilling Company was completed on March 11, 2025, with its results included from that date. The acquisition is expected to generate synergies and benefits, though integration costs and risks exist[113][120] - The market outlook is mixed. While supportive oil prices and international expansion are positive, U.S. activity has been reduced due to volatile natural gas prices and higher interest rates in 2023-2024. Customer consolidation in the U.S. may also impact rig demand[116][117][119] Q1 2025 vs Q1 2024 Financial Summary | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Revenues | $736.2M | $733.7M | | Net Income (Loss) Attributable to Nabors | $33.0M | $(34.3)M | | Diluted EPS | $2.18 | $(4.54) | - Primary sources of liquidity are cash from operations, cash on hand ($404.1 million including investments), and availability under the 2024 Credit Agreement. The company expects these sources to be sufficient for at least the next 12 months[136][149] Segment Results of Operations In Q1 2025, International Drilling revenue grew 9% to $381.7 million with a 47% increase in adjusted operating income, driven by higher rig count and better pricing. Drilling Solutions revenue rose 23% to $93.2 million, boosted by the Parker acquisition. Conversely, U.S. Drilling revenue fell 15% to $230.7 million due to a 13% drop in working rigs. Rig Technologies revenue also declined 12% to $44.2 million, though margins remained stable Segment Performance (Q1 2025 vs Q1 2024, in thousands) | Segment | Operating Revenues (Q1'25) | Operating Revenues (Q1'24) | Change | Adjusted Operating Income (Q1'25) | Adjusted Operating Income (Q1'24) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | U.S. Drilling | $230,746 | $271,989 | (15)% | $31,599 | $50,529 | (37)% | | International Drilling | $381,718 | $349,359 | 9% | $32,958 | $22,476 | 47% | | Drilling Solutions | $93,179 | $75,574 | 23% | $32,913 | $26,893 | 22% | | Rig Technologies | $44,165 | $50,156 | (12)% | $4,335 | $4,209 | 3% | - U.S. Drilling performance declined due to a 13% decrease in the average number of rigs working (68.2 in Q1'25 vs 78.7 in Q1'24), while pricing remained stable[128] - International Drilling saw growth from a 5% increase in average rigs working (85.0 in Q1'25 vs 81.0 in Q1'24) and improved pricing[129] - Drilling Solutions revenue increase was primarily due to $21.7 million from acquired Parker operations, which offset declines in U.S. markets[130] Liquidity and Capital Resources As of March 31, 2025, Nabors had a solid liquidity position with $404.1 million in cash and short-term investments and $531.2 million in working capital. The company was in full compliance with its 2024 Credit Agreement covenants, with an interest coverage ratio of 4.20:1.00 (well above the 2.75:1.00 requirement). Cash from operations decreased to $87.7 million in Q1 2025 from $107.2 million in Q1 2024. The company utilized its credit facility to repay the $177.8 million Parker Term Loan acquired in the merger - As of March 31, 2025, the company had cash and short-term investments of $404.1 million and working capital of $531.2 million[136] - The company was in compliance with all covenants under its 2024 Credit Agreement as of March 31, 2025, and expects to remain so for the next twelve months[140] - On March 25, 2025, the outstanding balance of the $177.8 million Parker Term Loan was repaid using the company's credit agreement[53][157] - The Accounts Receivable (A/R) Purchase Agreement term was extended to April 1, 2027, providing ongoing liquidity. As of March 31, 2025, $121.0 million had been sold under this facility[145][146] Quantitative and Qualitative Disclosures About Market Risk The company states that there were no material changes in its exposure to market risks during the first quarter of 2025 compared to what was disclosed in its 2024 Annual Report - There were no material changes in the company's exposure to market risk during the three months ended March 31, 2025, from those disclosed in the 2024 Annual Report[162] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. No material changes were made to the internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective[164] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[165] Part II - Other Information Legal Proceedings The company refers to Note 9 of the financial statements for information on legal proceedings. The most significant matter detailed is a long-standing case in Algeria concerning foreign currency exchange controls, where a judgment of approximately $21.1 million was previously entered against Nabors. The Algerian Supreme Court has repeatedly overturned lower court rulings against the company, most recently on April 10, 2025, and the case has been sent to a different court for rehearing. The potential loss in excess of amounts accrued is up to $13.1 million - For details on legal proceedings, the report directs readers to Note 9 — Commitments and Contingencies — Litigation[167] - A key legal matter involves a judgment in Algeria for alleged violations of foreign currency exchange controls. On April 10, 2025, the Algerian Supreme Court again cancelled the judgment and sent the case back to a different court. The ultimate resolution could result in a loss of up to $13.1 million in excess of amounts accrued[76] Risk Factors The company highlights that there have been no material changes to its risk factors from the 2024 Annual Report, other than new risks related to the Parker acquisition and trade policies. A key new risk is the concentration of voting power with former Parker shareholders who are bound by voting agreements to support board recommendations. Another emphasized risk is the potential adverse impact of changes in U.S. or other national trade policies, such as tariffs, which could increase supply chain costs - There have been no material changes to risk factors from the 2024 Annual Report, other than those listed in this section[168] - A new risk factor arises from the Parker acquisition, where certain former Parker shareholders entered into Voting & Lock-Up Agreements, requiring them to vote in favor of board-recommended proposals, which could limit other shareholders' ability to influence actions[169] - The company highlights the risk of significant changes in national trade policies, such as tariffs and import restrictions, which could increase the cost of raw materials and components, adversely affecting business and results of operations[171][172] Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2025, the company withheld a total of 45,000 common shares to satisfy tax withholding obligations related to share awards and the Parker acquisition. These were not part of a public repurchase program. As of March 31, 2025, $278.9 million remained authorized under the company's share repurchase program, which was reaffirmed in May 2025 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Repurchased (in thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31 | 10 | $57.17 | | Feb 1 - Feb 28 | 19 | $49.09 | | Mar 1 - Mar 31 | 16 | $38.00 | - The shares repurchased were withheld to satisfy tax withholding obligations for employees, directors, and in connection with the Parker acquisition, and were not part of a publicly announced repurchase program[174][175] - As of March 31, 2025, $278.9 million remained available for share repurchases under the authorized program, which was reaffirmed by the Board in May 2025[176] Other Information The company disclosed that it awarded bonuses totaling $9.0 million for the successful completion of the Parker Wellbore acquisition. Of this amount, $6.3 million was awarded to named executive officers and $2.7 million to other employees. No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - Bonuses were awarded for the successful completion of the Parker Wellbore acquisition, totaling $6.3 million for named executive officers and $2.7 million for other employees[181] - During the quarter ended March 31, 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[181]