Nabors(NBR) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full year 2025 revenue was $3.2 billion, reflecting an 8.7% year-over-year growth, primarily driven by the acquisition of Parker and strong international expansion [20] - Adjusted EBITDA for the full year was $913 million, an increase of $31 million compared to the prior year [20] - Fourth quarter adjusted EBITDA totaled $222 million, exceeding previous expectations, with an EBITDA margin of 27.8%, down 110 basis points sequentially [21][22] Business Line Data and Key Metrics Changes - International drilling revenue was $424 million, a sequential growth of 4.1%, with EBITDA for the segment increasing to $131 million [22][23] - U.S. drilling revenue for the fourth quarter was $241 million, reflecting a 3.7% sequential decline, while EBITDA totaled $93 million, a decrease of 1% [24][25] - The drilling solutions segment generated revenue of $108 million in the fourth quarter, with EBITDA of $41 million, resulting in an EBITDA margin of 38.3% [28] Market Data and Key Metrics Changes - The average daily rig count in the Lower 48 increased to 62 rigs by the end of the fourth quarter, with a current count of 66 rigs [10][26] - The gas-directed industry rig count in the Lower 48 increased by over 20% in 2025, with Nabors' gas rig count increasing by 50% [10] - International drilling average rig count increased to 93.3 rigs, exceeding expectations by 2.3 rigs [23] Company Strategy and Development Direction - The company aims to focus on performance excellence in the Lower 48 rig market and expand in the international drilling market, leveraging multi-year contracts and innovative technology [6][7] - The integration of Parker Wellbore is progressing well, with expectations to generate at least $70 million in adjusted EBITDA from retained Parker businesses in 2026 [36] - The company is committed to reducing debt, having reduced net debt by over $554 million, the lowest level since 2005 [18][44] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the second half of 2026 due to market uncertainties, but remains confident in customer momentum and operational performance [51][53] - The outlook for natural gas remains positive, with expectations for increased LNG exports and domestic consumption [9] - Management highlighted the potential for increased oil activity in Venezuela and ongoing expansion plans in the Middle East and North Africa [10][46] Other Important Information - The company generated adjusted free cash flow of $132 million in the fourth quarter, significantly exceeding the revised guidance of approximately $80 million [39] - Capital expenditures for the fourth quarter were $158 million, lower than previous guidance, with expectations for 2026 capital expenditures to be in the range of $730 million to $760 million [37][38] Q&A Session Summary Question: Lower 48 outlook and rig count increase - Management noted that the rig count is currently at 66, with a shift towards public operators and an increase in gas rig count, indicating favorable operator economics [49][50] Question: Confidence in Saudi Arabia's rig activation timelines - Management expressed confidence in the activation of suspended rigs and new builds in Saudi Arabia, with a positive outlook for the market driven by Aramco's actions [60][62] Question: Upstream spending in Mexico and additional rigs - Management confirmed ongoing discussions for additional rigs in Mexico, focusing on making current rigs profitable before expanding further [66]