Nabors(US:NBR)2022-04-28 22:52Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2022 was $131 million, reflecting a minor decrease of $1.1 million or 0.9% sequentially [11][53] - Net loss from continuing operations was $184 million or $22.51 per share, compared to a loss of $114 million or $14.60 per share in the prior quarter [47] - Revenue from operations increased to $569 million, a 5% sequential improvement [51] - Net debt improved by $55 million in Q1 2022, largely due to the exercise of warrants [64] Business Line Data and Key Metrics Changes - Revenue in the Drilling Solutions segment increased by nearly 5% sequentially, with EBITDA reaching $20 million, the highest since the pandemic began [12][61] - U.S. Drilling EBITDA was $74.3 million, up by $5 million or 7% compared to the prior quarter, driven by a 19% improvement in Lower 48 EBITDA [54] - International EBITDA was $71.2 million, decreasing by almost $2 million sequentially, primarily due to operations in Russia [58] Market Data and Key Metrics Changes - The global average rig count increased by 10 rigs in Q1 2022, driven mainly by increased U.S. drilling activity [11] - Average daily revenue exceeded $23,000 in Q1 2022, up nearly $300 or 6% sequentially [33] - The average rig count in the Lower 48 increased to 83.4 rigs, up approximately 9 rigs from the previous quarter [55] Company Strategy and Development Direction - The company is focused on five key initiatives: leading technology in the U.S. market, expanding international business, improving technology and innovation, enhancing capital structure, and committing to sustainability [14] - The company aims to target the third-party rig market to expand its addressable market beyond its own rigs [20] - Investments in geothermal technology and energy transition initiatives are seen as potential growth areas, with expectations that these could contribute significantly to future revenues [131] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment has improved, with WTI crude oil prices closing above $100, which is expected to incentivize increased drilling activity [29][31] - The company anticipates continued increases in drilling activity globally, with a projected increase in the Lower 48 average daily margin to approximately $8,500 per day in Q2 2022 [56] - Management expressed confidence in achieving their long-term EBITDA target of $800 million, supported by expected improvements in rig margins [93] Other Important Information - The company is experiencing challenges related to supply chain constraints and inflation, which have led to increased costs [43][66] - The company has made significant progress in reducing net debt and improving its capital structure, including the completion of a new revolving credit facility [71][72] - The company is targeting breakeven free cash flow for Q2 2022, with expectations of generating over $100 million in free cash flow for the year [70] Q&A Session Summary Question: Utilization rates in the U.S. Lower 48 high-spec area - Management indicated that they expect to exit the year with over 100 rigs, with plans to add additional rigs with minimal capital [80][81] Question: Warrant exercise trends and near-term debt priorities - Management confirmed that warrant exercises have been cash-based and are expected to continue, with discussions on future financing options ongoing [84][88] Question: Lower 48 margins beyond Q2 - Management believes that margins could reach around $10,000 per day, with a strong focus on executing contracts to achieve this [92][95] Question: International contract re-openers and pricing drivers - Management highlighted that supply-demand tightness and labor issues are expected to drive pricing improvements in international markets [106][110] Question: Geothermal investments and future earnings potential - Management expressed optimism that geothermal initiatives could contribute significantly to revenues, potentially accounting for a quarter of the business in the next five years [131]