Nabors Industries Ltd (NBR) Q4 2024 Earnings Call Highlights: Navigating Challenges with ...

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Fri, Feb 14, 2025, 12:17 AM 4 min read

Adjusted EBITDA: $221 million for the fourth quarter.
Free Cash Flow: Consumed approximately $50 million in the fourth quarter, below expectations of generating $20 million.
Revenue: $730 million for the fourth quarter, a $2 million sequential reduction.
US Drilling Segment Revenue: Declined by $13 million sequentially, or 5.2%.
International Drilling Revenue: $371 million, an increase of $2.8 million.
Drilling Solutions Revenue: $76 million, decreased by $3.6 million or 4.5% sequentially.
Rig Technologies Revenue: $56.2 million, up $10.4 million or 22.6%.
Capital Expenditures: $241 million in the fourth quarter, with $143 million for Saudi new builds.
Daily Rig Margins (Lower 48): Approximately $15,000 in the fourth quarter.
NDS Gross Margin: Exceeded 54% in the fourth quarter.
Lower 48 Average Rig Count: Averaged 66, a decrease of two rigs.
International Average Rig Count: Stable at 85 rigs.
Saudi New Builds: 9th new build deployed in the fourth quarter, with 5 more scheduled for 2025.
Capital Expenditure Forecast for 2025: $710 to $720 million.
Expected Free Cash Flow for 2025: Around break-even, with negative free cash flow from Saudi operations of approximately $150 million.

Warning! GuruFocus has detected 2 Warning Signs with NBR.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Nabors Industries Ltd (NYSE:NBR) reported a strong performance in international markets, with 10 international rigs activated in 2024 and plans for 10 more deployments in 2025.
The company's technology-focused businesses, NDS and Rigtech, generated a combined EBITA of more than $43 million, with their contribution increasing to 19.5% of the company's consolidated EBITA.
Nabors Industries Ltd (NYSE:NBR) is optimistic about incremental rig awards in key geographies, which are expected to deploy in 2026.
The company has a strategic partnership with Saudi Aramco, with a new build rig program that ensures a return on invested capital in 5 years, providing long-term stability.
Nabors Industries Ltd (NYSE:NBR) is confident in realizing annualized cost synergies of at least $35 million in 2025 from the Parker acquisition, which is expected to be accretive to free cash flow.

Negative Points

Free cash flow fell short in the fourth quarter due to substantial receivables in Mexico and accelerated milestone payments in Saudi Arabia.
The lower 48 market has not improved as anticipated, impacting the company's drilling rigs and NDS businesses.
Significant delays in payments from a customer in Mexico, amounting to approximately $50 million, have affected cash flow.
The ongoing investment in Saudi Arabia is significant, with a forecasted negative free cash flow of approximately $150 million from the SAA segment in 2025.
The US market remains sluggish, with a lack of growth in the lower 48 market and an expected 4% reduction in rig count by major clients.

Q & A Highlights

Q: Can you clarify what you mean by "substantially reducing gross debt" and how you plan to achieve this? A: William Restrepo, Chief Financial Officer: We plan to reduce gross debt by approximately $150 million in 2025. This will be achieved by generating free cash flow outside of our Saudi Arabian joint venture, which will be used to pay down debt. The joint venture itself will be in the red due to significant capital expenditures, but other parts of the company will generate positive free cash flow to offset this.

Q: What is your outlook for the international market, particularly in Saudi Arabia, and are there any expected rig releases? A: Anthony Petrello, Chairperson, President & CEO: While there may be some rig releases, our partnership with Saudi Aramco remains strong, and they are committed to continuing the new build program. This reflects their long-term view of the market. We are optimistic about international opportunities, especially in Latin America and Asia, which support pricing and growth.

Q: How do you see the international cash margin progressing throughout the year? A: William Restrepo, Chief Financial Officer: We expect a gradual progression in international cash margins over the year as we add 10 rigs at better pricing levels. This will result in an average daily margin of over $17,500, reflecting improved pricing and new rig deployments.

Q: What is your strategy for managing cash extraction in Argentina given historical challenges? A: Anthony Petrello, Chairperson, President & CEO: We have implemented a new operating model that allows us to extract cash and profits in US dollars, which has been well-received by customers. This model, along with recent government changes to exchange control rules, is helping us manage cash flow more effectively in Argentina.

Q: Can you provide more details on the capital expenditure breakdown for 2025, excluding the Saudi new build program? A: William Restrepo, Chief Financial Officer: Outside the $360 million for the Saudi new builds, we expect $355 million in other capital expenditures. This includes $25 million for sustaining CapEx, $56 million for international contracts in Kuwait and Argentina, and smaller amounts for NDS and corporate expenses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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