Nabors Industries - Earnings Call - Q1 2025

Executive Summary

• Q1 revenue beat while EBITDA and S&P EPS were modest misses: Operating revenue was $736.2M vs S&P Global consensus $718.0M*, Adjusted EBITDA was $206.3M vs $210.9M*, and S&P “Primary EPS” was -$3.24 vs -$3.48*; GAAP diluted EPS was $2.18, boosted by a $113M non‑cash bargain purchase gain from the Parker acquisition, partly offset by Russia wind‑down charges.
• Mix shift: International margins improved (daily adj. gross margin $17,421, +$734 q/q), while Lower 48 margins compressed to $14,276 on churn‑driven cost inefficiencies.
• Guidance pivot: FY25 capex raised to $770–$780M (from $710–$720M previously) with 2025 adjusted FCF guided to ~$80M ex‑tariffs (prior breakeven); Q2 set up calls for stronger International and NDS (NDS EBITDA ~ $75M incl. ~$43M from Parker) but slightly lower Lower 48 daily margins (~$14,100).
• Catalysts: Parker integration (on track for $40M 2025 synergies) and accelerating SANAD newbuild deployments (rigs #10 in Q1 and #11 in April; #12 later in Q2) support margin/FCF trajectory; management flagged potential medium‑term value realization from SANAD, including possible IPO discussions with Aramco.

What Went Well and What Went Wrong

• What Went Well

  • International margin expansion: International daily adjusted gross margin rose to $17,421 (+>$700/day q/q), aided by Saudi newbuilds and broader operational improvement.
  • NDS resilience and accretion from Parker: NDS EBITDA was $40.9M with 53% segment gross margin; Parker contributed $9.6M in the 20 days post‑close, and management expects ~$130M incremental 2025 EBITDA post‑closing plus ~$40M synergies.
  • Strategic progress in Saudi JV (SANAD): 10th newbuild deployed in Q1, 11th in April, 12th targeted for later in Q2; program expected to drive significant EBITDA and long‑term FCF, with 15 newbuilds operating by early 2026.

• What Went Wrong

  • U.S. Lower 48 margin pressure: Daily margins fell to $14,276 (from $14,940) on elevated churn and inefficiencies; U.S. Drilling EBITDA declined to $92.7M (from $105.8M).
  • Rig Technologies softness: EBITDA dropped to $5.6M on lower capital equipment deliveries in the Middle East and decreased OEM aftermarket volumes.
  • Adjusted FCF consumption: Adjusted free cash flow was a use of $71.4M on seasonal payments, Parker transaction costs (~$14M), and collections timing (Mexico); management still targets ~$80M adjusted FCF for 2025 ex‑tariffs.

Transcript

Operator (participant)

Good day and welcome to the First Quarter 2025 Nabors Industries Ltd Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note that the event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Corporate Development and Investor Relations. Please go ahead.

William Conroy (VP of Corporate Development and Investor Relations)

Good morning, everyone. Thank you for joining Nabors Industries Ltd's First Quarter 2025 Earnings Conference Call. Today, we will follow our customary format with Tony Petrello, our Chairman, President, and Chief Executive Officer, and William Restrepo, our Chief Financial Officer, providing their perspectives on the quarter's results, along with insights into our markets and how we expect Nabors to perform in these markets. In support of these remarks, the slide deck is available both as a download within the webcast and in the investor relations section of nabors.com. Instructions for the replay of this call are posted on the website as well. With us today, in addition to Tony, William, and me, are other members of the senior management team. Since much of our commentary today will include our forward expectations, they may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Such forward-looking statements are subject to certain risks and uncertainties, as disclosed by Nabors Industries Ltd from time to time in our filings with the Securities and Exchange Commission. As a result of these factors, our actual results may vary materially from those indicated or implied by such forward-looking statements. Also, during the call, we may discuss certain non-GAAP financial measures, such as net debt, adjusted operating income, adjusted EBITDA, and adjusted free cash flow. All references to EBITDA made by either Tony or William during their presentations, whether qualified by the word adjusted or otherwise, mean adjusted EBITDA, as that term is defined on our website and in our earnings release. Likewise, unless the context clearly indicates otherwise, references to cash flow mean adjusted free cash flow, as that non-GAAP measure is defined in our earnings release.

We have posted to the investor relations section of our website a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures. With that, I will turn the call over to Tony to begin.

Tony Petrello (Chairman, President and CEO)

Good morning. Thank you for joining us today as we review our first quarter results. We will also comment on our acquisition of Parker Wellbore and on the current market environment. Let me start with a few remarks on the Parker acquisition. We completed the transaction on March 11. Thus far, the Parker Wellbore operations have performed in line with our expectations. Our efforts to realize synergies are progressing. We are on track to achieve our $40 million target for 2025. In summary, the integration is proceeding with the appropriate importance and speed. Next, let me address the macro environment. Several factors currently weigh on the oil market. In particular, plans announced by OPEC+ to gradually unwind prior output reductions, the potential impact of higher tariffs on the global economy, and relatively high production from U.S. shale facilitated by continued efficiency gains.

On the positive side, natural gas activity in the U.S. appears poised for some recovery over the upcoming quarters. We have already added a few rigs in gas-focused basins. We are prepared to bring multiple rigs back in the event of an acceleration in natural gas activity. Our results for the quarter include Nabors Industries Ltd's legacy business, plus the contribution of 20 days from Parker post-closing. The international drilling business performed well, especially our San Andreas venture in Saudi Arabia. We received a partial payment on our receivable in Mexico. Nonetheless, we continue to be extremely focused on this issue and expect further progress in the second quarter. Free cash flow in the quarter benefited from lower-than-expected CapEx on the signed new builds, offsetting the normal heavy seasonal payments at the beginning of the year.

In the U.S. Lower 48, although our revenue per day held up well, our daily margin fell short. During the quarter, we experienced a relatively high level of churn that caused inefficiencies and increased our operational expenses. The activity churn also affected our NDS business. Total adjusted EBITDA in the first quarter was $206 million. The Lower 48 market average quarterly rig count essentially remained at the levels of the prior quarters. Our own rig count varied through the quarter. We entered the quarter at 64 rigs. For a brief time, our count touched 58. We finished the quarter at 62. Now it stands at 63. Next, I'll discuss the international markets. In Russia, the recent expansion of U.S. sanctions led us to suspend operations there. At this point, we do not expect to restart our activities in that market.

In addition, the financial performance of the three rigs had become increasingly marginal. Continuing to support the business was becoming challenging. In other markets, we reached the end of our contracts on two rigs in Papua New Guinea and the United Arab Emirates. We started up the 10th new build in Saudi Arabia on its initial six-year term contract. We also reactivated a rig in Colombia. However, we received notices to release two rigs by the end of the second quarter. We are working on recontracting both of these rigs. Over the remaining three quarters of 2025, we expect to add 10 rigs. In April, we have already deployed two of those, another new build in Saudi Arabia, and one of the rigs in Kuwait. Notwithstanding worldwide rig count volatility, current tendering activity continues in several countries across the Middle East and in Latin America.

We are focused on opportunities in key geographies that meet our financial thresholds while minimizing our capital requirements. Now, let me comment on the U.S. market. The Baker Hughes weekly Lower 48 rig count was remarkably stable during the quarter. We have noted a shift in this market. Smaller operators have added rigs, while larger ones have reduced their activity. This aggregate performance, notwithstanding churn in the quarter, affected downward pressure on our own rig count. Daily margin for our Lower 48 rigs was $14,276 per day. Our expenses in this market increased in the first quarter, driven by the inefficiencies I mentioned earlier. We are focused on reducing these costs and aligning with the current environment. Our drilling solutions and rig technologies businesses combined generated EBITDA of more than $46 million. Together, their growth in the previous quarter was due to the addition of Parker Wellbore.

The Parker Wellbore operations make an immediate impact on our strategy to grow the contribution from our NDS business. Now, I will make some comments on the key drivers of our results. I'll start with our international drilling business. The international markets continue to provide opportunities to deploy additional rigs. Several markets appear to be growing and increasingly require our advanced technology. Even in this environment, we see prospects to reactivate a number of currently idle rigs. Next, I'll summarize the developments in our international drilling business. In the first quarter, we reactivated a recently idle rig in Colombia. We were able to rapidly place the rig with a different client, further diversifying our customer base there. We are working to place the two recently idle rigs as well. In Kuwait, the first rig of the previously announced award spun earlier this month.

The second and third rigs are scheduled to commence operations in the second quarter. Kuwait is an important market for our high-performance drilling capabilities. We expect the rigs to materially contribute to our earnings and cash flow over the life of the contracts. Across international markets, we see a number of opportunities. Most of them are concentrated in the Eastern Hemisphere, and a limited number are in Latin America. When evaluating tenders, our paramount concerns are cash payout and capital expenditures. We believe that any incremental demand in those markets should help support pricing. In Saudi Arabia, our San Andreas drilling joint venture started up its 10th new build during the first quarter. Number 11 started early in the second quarter. Three more are scheduled for 2025. Another one is slated to start in early 2026.

That will bring the total number of working new builds to 15, in addition to the 40 legacy rigs currently active. On top of these 15 deployments, San Andreas and its customer are in discussions on the next five new builds. We expect this process to be concluded over the next couple of quarters. Construction would start after the rigs are awarded. In Saudi Arabia, a number of land rigs have been suspended over the past year. Approximately three quarters of those rigs were supporting conventional oil development. Over the same time period, in addition to the five San Andreas new builds, a number of rigs have been added in the unconventional natural gas market. I would note that approximately 75% of San Andreas fleet works in natural gas. Virtually all of our fleet is capable of operating in the more demanding gas spaces.

Before I move to our U.S. business, I would like to make some additional comments on San Andreas. In March, we published materials illustrating the value potential for San Andreas. This year, San Andreas forecasts it will earn adjusted EBITDA of over $300 million. At this level, the business already has scale. On top of that, we project the new build additions at a cadence of five per year will drive annual adjusted EBITDA successfully higher. This combination of material scale and strong embedded growth, along with attractive valuations in the region, comprise the formula for significant potential value creation over the next few years. Our goal is to realize our share of that value with substantial benefits to Nabors Industries Ltd shareholders. Now, I'll discuss our performance in the U.S. daily rig margins in our Lower 48 rig fleet declined more than expected, driven by increased costs.

In this market, we continue to experience elevated levels of volatility as our customer mix shifted. This created challenges for our operating efficiencies and margins. The current rig pricing environment has to date remained relatively disciplined. It is true, however, that we have seen a slight downward trend in leading-edge pricing. We believe this will have some impact on our average margins over the next few quarters. Industry utilization for high-spec rigs has been in a narrow range for some time. About two-thirds of the industry's high-spec rigs in the U.S. Lower 48 are currently working. At these levels, there is some pressure on day rates. We are working to mitigate this pressure, taking out costs where possible and ensuring the field support structure is appropriate for the working fleet. Next, let me discuss our technology and innovation.

In the first quarter, our Drilling Solutions business did experience some leakage from the churn in the U.S. However, Drilling Solutions remained a significant contributor to consolidated results. NDS's quarterly performance also benefited from the addition of Parker Wellbore's operations after the acquisition closed in March. The segment's combined gross profit margin was approximately 53%. In the first quarter, NDS's revenue from international markets, excluding the impact of Parker Wellbore business, comprised almost half of the segment's revenue. NDS is clearly benefiting from its geographic diversity as the international growth continues to compensate for sluggishness in the U.S. Next, let me make some comments on our capital structure. Our highest priority remains the reduction of our debt. Early in the second quarter, we took advantage of the market and repurchased $11.4 million face value of notes at a significant discount.

We expect to generate free cash in 2025 to reduce debt, despite material cash consumption in San Andreas. Next, I will discuss the global unit outlook, starting with our quarterly survey. At the end of the first quarter, we collected the activity plans for the largest Lower 48 industry clients. Our survey covers 14 operators. These clients account for approximately 43% of the Lower 48 industry's working rig count at the end of the quarter. From the latest survey, this group expects to reduce its rig count by approximately 4% from the end of the first quarter through the end of 2025. This decline is spread across slightly more than half of the operators. With this outlook, a segment of mainly large public operators is now indicating a total reduction of 7% from the beginning of 2025 through the end of the year.

Over the last couple of months, we have seen the impact of these customer plans, but we have managed to replace this drop in activity with a number of contracts. We expect this trend to continue. In the international markets, to date, the environment remains positive. Including the rigs recently deployed in Kuwait and Saudi Arabia, we have 10 rigs expected to commence work during the remaining three quarters of 2025. Six of those rigs are in the second quarter. We should end the quarter with 87 international rigs working compared to 85 at the end of 2024. After that, in the second half of the year, we have four more rigs scheduled to deploy: two new builds in Saudi Arabia, one in Argentina, and one in India. Before turning the call over to William, I'll wrap up with a few remarks on Parker Wellbore.

As I mentioned, we have already made considerable progress toward our goal of achieving $40 million in core synergies during 2025. I want to recognize the outstanding efforts of both teams to make this happen. Their collaboration and dedication fuel my confidence in reaching our target. Now, let me turn the call over to William, who will discuss our financial results.

William Restrepo (CFO)

Thank you, Tony. Good morning, everyone, and thank you for joining us today. I would like to make an initial comment on the Parker Wellbore acquisition, which closed on March 11. Our first quarter financial statements included 20 days for the acquired business. The Parker Wellbore numbers are reflected across our segments. The financial results I will provide include the Parker Wellbore contribution, but I will also provide details on the acquired business.

During the first quarter, we experienced significant disarray in the equity and debt markets, and we expect more of the same in the second quarter as the current administration continues with this new approach to foreign trade. Given the current financial market volatility, I will provide some comments on the current state of the drilling market. Up to now, we have not seen reductions in drilling activity in the U.S. nor in our international markets as a result of the tariff uncertainty. We are experiencing decreased activity in certain international markets, but we believe these reductions, which started last year, are unrelated to the current recession fears. In Saudi Arabia, we continue to see an acceleration in the shift from oil to gas drilling, and in Mexico, our customer continued to cut spending, a process that started after the elections at the end of last year.

Activity in Colombia has been affected for some time by the policies of the current government. It is entirely possible that the current political situation could have an impact on our current rig count going forward. Elsewhere, we have managed to add several rigs in our Lower 48 market since our rig count troughed during the first quarter, and we continue to deploy rigs in other international markets. Consequently, Nabors Industries Ltd results for the first quarter landed close to our expectations. Sequentially, as we expected, we experienced reduced activity. This was driven essentially by a five-rig reduction in our Lower 48 business. Higher turnover on contracts, with multiple rigs moving between customers, resulted in idle periods for our working fleet during the quarter. I would also highlight that our rig count today of 63 rigs has recovered to the level we reached at the end of December.

We do expect a further slight increase in rig count during the second quarter from where we currently stand. NDS activity was also affected by our lower rig count in the Lower 48. International NDS activity held up relatively well during the quarter as we continued to see strength in several markets. Internationally, rig count was stable. We added one new build in Saudi Arabia, but this was offset by a reduction of one rig in our average rig count in Russia. In the month of March, we suspended activity in our three rigs in response to the recently expanded Russian sanctions. We don't expect our activity in this market to resume in the near term. I would point out, though, that our EBITDA for Russia, given the current operational challenges, has been basically break-even.

Two other rigs, one in Papua New Guinea and a second one in the United Arab Emirates, reached the end of the contracts at the end of the first quarter. Given the timing, basically the end of the quarter, these rigs had limited impact on our Q1 rig count. On the plus side, we added a rig in Colombia at the end of Q1. However, we do expect future rig count reductions in that market. Looking forward to the second quarter, we expect a slight increase in our average rig count. In the quarter, we expect to deploy two new builds in Saudi Arabia, as well as three rigs in Kuwait, adding three and a half average rigs for the quarter. We also expect the U.S. Lower 48 to add another three average rigs, predominantly in the Eagle Ford and Haynesville areas, and mainly for natural gas activity.

These increases will be offset by the previously mentioned drop-off in Russia, Papua New Guinea, the United Arab Emirates, and Colombia, with a combined impact of five average rigs. Now, I'll detail our financial performance for the first quarter, provide some updates on key strategic initiatives, and share our outlook for the second quarter. Revenue from operations for the first quarter was $736 million, compared to $730 million in the prior quarter, an increase of $6 million or 1%. Incremental revenue from our international segment and our Parker Wellbore acquisition compensated for a decline in U.S. Lower 48 activity. U.S. drilling revenue at $231 million declined by $11 million sequentially, or 4.5%. Included in these numbers, Parker Wellbore revenue was $5.3 million. Our rig count in the U.S. Lower 48 averaged 61, a five-rig decrease from the fourth quarter. As mentioned, this reduction was partially related to idle time from rigs moving between contracts.

We exited Q1 with 62 rigs operating in the Lower 48, and we are running 63 rigs today. Our average daily revenue improved sequentially. Daily revenue in the Lower 48 came in at $34,546, which is $1,150 higher than the fourth quarter. Although we have encountered some market-driven pressure on base day rates in certain regions, this was more than offset by performance-based bonuses, by an uptick in ancillary services provided to clients, and by revenue related to reimbursable moves. On our latest contracts, revenue per day is now in the $30,000 range, with some exceptions still around the mid-$30,000 level. The international drilling segment generated revenue of $382 million and an increase of $10.3 million, or 3% from the prior quarter, driven by activity increases in key markets. Parker contributed $3.8 million to this increase. Rig count increased from 84.8 to 85 rigs during the quarter.

The slight increase came from the 20-day impact of Parker Wellbore's two operating rigs in Kazakhstan. Drilling Solutions revenue was $93.2 million and an increase of $17.2 million, or 22.6%. Parker Wellbore revenue for the quarter was $21.7 million, more than offsetting the $4.5 million, or 6% reduction, in our legacy NDS business. Our Rig Technologies segment generated revenue of $44.2 million, a $12 million decline sequentially, driven primarily by lower capital equipment deliveries in the Middle East and a decrease in parts sales and repairs in the U.S.. Total adjusted EBITDA for the quarter was $206.3 million, compared to $220.5 million in the fourth quarter. The $14 million sequential decline mainly reflected lower rig count and higher operational expenses in U.S. Lower 48 drilling. Decreased EBITDA in Rig Technologies and our NDS legacy business also contributed to the sequential reduction.

These negatives were partially offset by improved international results and the $7.8 million contribution by Parker Wellbore to our first quarter EBITDA. U.S. drilling EBITDA of $92.7 million was down by $13 million, or 12.3% sequentially. This deterioration reflected a five-rig reduction, roughly 8%, and some erosion in daily margins in our Lower 48 drilling business. Average daily rig margins came in just under $14,300, which is down $660, or 4% from the fourth quarter. This deterioration was essentially related to the increased churn in our rig count, which made it challenging to align compensation costs with activity levels. We are actively focused on right-sizing expenses to our activity level and expect our rig operational expenses to fall back somewhat. For the second quarter, we forecast Lower 48 daily margins of approximately $14,100. We expect some decline in average daily revenue, largely mitigated by cost reductions.

We anticipate our average rig count in this market to be between 63 and 64 rigs. On a combined basis, Alaska and the U.S. offshore businesses generated EBITDA of $20.5 million in the first quarter. Parker Wellbore contributed approximately $800,000 to this total. Second quarter EBITDA from these businesses should be approximately $26 million, including an expected $5.3 million contribution from Parker Wellbore. Rig count is expected to increase to nine rigs, including the contribution from the Parker Wellbore acquisition. EBITDA from our international segment at $115.5 million increased by $3.5 million, or 3.1% sequentially. This improvement was on a slightly higher average rig count of 85, including 20 days of contribution from Parker Wellbore rigs. The increase reflected an additional deployment in Saudi Arabia and strong results in other international markets. Daily gross margin was approximately $17,400, a $734 increase. Broad operational improvement drove this result.

For the second quarter, we expect improved EBITDA driven by deployments in Saudi Arabia and Kuwait. The 11th Saudi Arabia new build rig commenced operations earlier this month, and the 12th new build is expected to start later this quarter. In Kuwait, three rigs are returning to service, and are forecast to be progressively deployed during the quarter. As mentioned before, Russia, UAE, Papua New Guinea, and Colombia will decrease their rig count by a combined five rigs on the average. We forecast average daily gross margin to increase to $17,700 in the second quarter. Average rig count should range between 85-86 rigs, including two Parker Wellbore rigs in Kazakhstan. Drilling Solutions delivered EBITDA of $40.9 million in the first quarter, up $7 million. These results include a $9.6 million contribution from Parker Wellbore.

Without Parker Wellbore, our NDS business fell by 7.7%, mainly driven by a decreased rig count in the U.S. Lower 48. Our NDS segment comprised 16% of the total EBITDA from operations. Gross margin for this segment continues to be strong, coming in at a healthy 53% this quarter, including the contribution from Parker Wellbore. For the second quarter, we expect NDS EBITDA of approximately $75 million, supported by our increased U.S. Lower 48 rig count and by expansion in international markets. We expect continued international growth in our performance software, Rig Cloud, and managed pressure drilling offerings, as well as casing running profitability improvement in the U.S.. Additionally, the Parker Wellbore acquisition will contribute a full quarter of EBITDA, or about $43 million, to our NDS results. Rig Technologies delivered EBITDA of $5.6 million in the first quarter, down sequentially from $9.2 million.

Second quarter EBITDA for Rig Technologies should be similar to the first quarter. As a result of the large annual payments that normally fall in the first quarter and the heavier interest payments, the beginning of the year normally consumes cash. Nonetheless, our adjusted free cash flow for the first quarter was somewhat better than the $80 million-$90 million free cash consumption we expected. Our Nabors Industries Ltd business, excluding Parker Wellbore, consumed approximately $61 million in free cash flow. Standard cash balances fell by only $2 million, as some of the new build CapEx milestones were delayed into the second quarter. Standard did pay roughly $47.5 million in new build CapEx during the first quarter. Excluding Parker Wellbore, CapEx for the quarter was some $70 million below expectations, but collections were $32 million below our forecast.

Although we collected $20 million in Mexico during the quarter, we were still $20 million below our target. We currently expect another large payment from our customer during the quarter. Collections in the U.S. were also sluggish. In the first quarter, we incurred approximately $14 million in costs related to the Parker Wellbore transaction, including legal fees and severance costs. We have made significant progress on capturing our planned synergies from the acquisition. The Parker Wellbore business consumed free cash of about $10 million post-closing. This mainly included $5 million in accrued interest that was prepaid on the redemption of the Parker Wellbore terminal and $6 million in capital expenditures. CapEx for the first quarter was $144 million, excluding Parker Wellbore, compared to $241 million in the prior quarter. This includes $47.5 million for the standard new build program.

Excluding Parker Wellbore, we maintain our target for 2025 capital expenditures in a range between $710 million and $720 million, including standard new build CapEx of approximately $360 million. In addition to these legacy expenditures, we expect Parker Wellbore CapEx of $60 million. For the second quarter, we are currently targeting capital expenditures of approximately $230 million, including Parker Wellbore CapEx of $35 million. At closing, we took on Parker Wellbore's gross debt of $178 million. We have since retired that high-interest rate obligation by drawing on our revolving credit facility, resulting in immediate interest savings. Our plan is to refinance this debt with a new term loan. We have launched this transaction and have received positive feedback from several participating banks. At this point, we maintain our annual guidance for both our Nabors Industries Ltd legacy business and for the newly acquired Parker Wellbore portfolio.

We expect Parker Wellbore to generate approximately $150 million of EBITDA during the full year of 2025. About $130 million of this EBITDA will be part of Nabors Industries Ltd's consolidated results for 2025, as $20 million was realized before closing. In addition, we expect to capture approximately $40 million of synergy gain in Nabors Industries Ltd's 2025 consolidated results. Our targeted synergy savings in the fourth quarter are approximately $15 million, which translates into at least $60 million in synergy savings for 2026. With that, I will turn the call to Tony for his concluding remarks.

Tony Petrello (Chairman, President and CEO)

Thank you, William. I will finish this morning with a few points. On our last earnings call, I concluded with remarks on industry volatility. I mentioned our objective is to execute through short-term disruptions while keeping Nabors Industries Ltd poised to thrive in the future.

We have constructed a strong portfolio of diversified businesses reaching major energy markets around the globe. This structure enables us to capitalize on opportunities across markets. Our international rig additions already in hand inform our outlook. With those, we have the capability to offset challenges in other markets. I believe we have the right strategy in place, both for today's environment and for the future. I look forward to reporting our progress. Thank you for your time this morning. We'll now take your questions.

Operator (participant)

We'll now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. If you wish to withdraw your question, please press star, then two. The first question is from Waqar Syed with ATB Capital Markets. Please go ahead.

Waqar Syed (Managing Director of Energy Technology and Services and Head of Research)

Thank you for taking my question.

William Restrepo (CFO)

Good morning.

Waqar Syed (Managing Director of Energy Technology and Services and Head of Research)

This first question, yeah, good morning. The question is on SANAD. Have you started accruing any debt in that JV right now or no? Not yet?

William Restrepo (CFO)

No, and we do not plan to for now, Wakaar. There is no need.

Waqar Syed (Managing Director of Energy Technology and Services and Head of Research)

Okay. Secondly, do you know if Saudi Aramco is finished with the rig releases, or do you expect there are still some more to come this quarter?

Tony Petrello (Chairman, President and CEO)

Let me back up a little bit in terms of what has happened, and let me give you just a thumbnail of where we are right now. Last year, on the offshore, you had 32 rigs suspended and one in this quarter on offshore. On land, last year you had 31, and this quarter you had 8. That is 39 total.

Now, you also have to bear in mind that on the offshore, there were some additions, only three. On land, last year there were 21 additions and 7 additions in the first quarter. That's 28. The net result of the delta change was 11 rigs, okay, on land. Obviously, all this activity is on the oil in terms of the reductions. I think what's underappreciated is the amount of condensate Aramco is generating on their gas production. That's driving some of this reassessment things in terms of the numbers, in addition to the sort of global oil demand issues. That's where it sits now. Obviously, in this environment, everyone has contingency plans, and obviously, Aramco has contingency plans. If things drop, there will be more suspensions, but they haven't called on them yet, given where things are still.

Everyone's in a wait-and-see attitude. As we said, with respect to SANAD ourselves, we think we're well-positioned because, number one, our existing rigs are basically in the gas play, super majority of that, and all our rigs are gas-capable. That's a real benefit we have compared to other people.

Waqar Syed (Managing Director of Energy Technology and Services and Head of Research)

Great. Yeah, that's a great answer. I see in your presentation you expect a restart of a rig in Mexico. Do you have an indication from PEMEX that that's going to happen, or is that just your expectation?

Tony Petrello (Chairman, President and CEO)

Yes, PEMEX is keen to get that rig restarted. Obviously, as William talked about, we continue to have the dialogue with the customer about payment issues, so that remains an issue. Yes, their plans are still to restart that rig.

William Restrepo (CFO)

Waqar, it's in their schedule, and we believe it's going to start because it's in their plan already. We obviously need to continue. We had some positive news in the first quarter. We did manage to collect roughly the same amount we invoiced, so we stayed in place. We are working on another transaction now to get a larger payment in the second quarter.

Waqar Syed (Managing Director of Energy Technology and Services and Head of Research)

Great. William, you provided some good guidance on the tariffs. Which business segment gets hit the most with the tariffs? Is it rig technology or also drilling with the drill pipe and other items?

William Restrepo (CFO)

I don't think drill pipe is the biggest hit on our drilling business. It's more like spares, pumps, things like that that over the years we have started to acquire from China. We have alternate vendors. The number you saw there is $10 million-$20 million.

That's a mitigated number. That's a number that we feel we can get down to if we get alternate vendors, and we also change our logistics a little bit. Today, we're very centralized. A lot of the stuff coming even from China comes to the U.S. first, and then is distributed across our operations for efficiency reasons. That obviously would change in the scenario that we put in place, which was 145% tariffs for China. Both of the scenarios, the range of those scenarios that we said $10-$20, assume 145% tariffs in China. Were that to change, that number will fall dramatically, of course, because most of that tariff impact is coming from China.

Operator (participant)

The next question is from David Smith with Pickering. Please go ahead.

David Smith (Director)

Hey, good morning, and thank you for taking my question.

Tony Petrello (Chairman, President and CEO)

Good morning.

David Smith (Director)

Completely agree that Standard stands out as a rare high-return investment in the land rig space with exceptional long-term visibility. Given your deleveraging priorities, how do you think about the potential to accelerate the value realization from Standard, potentially via an IPO? Should we view that as one of the potential levers you could pull if market conditions deteriorate in the next year or two?

Tony Petrello (Chairman, President and CEO)

I think you can assume that that is paramount on both Aramco and our agenda item. It is the obvious path. When you look at valuations in the Middle East in particular, you notice there how the reward for the drillers is radically different than what it is here in terms of multiples. We think Standard is the most attractive company in the region it could be in such a scenario.

Obviously, we have some preparatory work to be done in the meantime, and both parties are looking at that as an option, obviously. It is pretty clear that that is one path to realize value and create enormous shareholder value. If you look at our last investor call slide deck, we put a pro forma valuation of Nabors in it. In it, we do some of the parts analysis that you see there and analysis for SANAD, assuming you can extract that kind of multiple. The uplift, of course, is enormous. That, of course, is one of the long-range potentials in stock over the next two years to the extent that we can pull that off.

David Smith (Director)

Perfect. I appreciate it. The follow-up, if I may.

William, thank you for the detailed comments on the synergies expected from the Parker Wellbore acquisition, including the $15 million run rate for Q4. Can you give any color on what these additional synergy opportunities that you're seeing are in excess of the $35 million that was originally guided when the acquisition was announced?

William Restrepo (CFO)

Obviously, when we gave the guidance initially, we did not have our hands on the company yet, and a lot of the information was in a clean room. We did not have some of the data that later came when we assumed control of the company, which indicated that the corporate cost reductions would be a bit higher. We had more overlap in particular areas of overhead costs that could be taken out as we integrate our operations. That is where that mostly is coming from.

There's other improvements in terms of real estate and other particular contracts that we also can get out of, and now we have more certainty of that. Those are the main components.

David Smith (Director)

Thank you very much.

Operator (participant)

The next question is from Arun Jayaram with JP Morgan. Please go ahead.

Arun Jayaram (Research Analyst)

Good morning. Good afternoon, gentlemen.

Tony Petrello (Chairman, President and CEO)

Good morning.

Arun Jayaram (Research Analyst)

Really appreciate the deck that you put out in mid-March, which highlighted the inner workings around SANAD. That was really, really helpful. Tony, I want to get your perspective. You have obviously 15 new builds thus far under the 50 rig award, which have been either in the field or under construction. What's your sense on the timing of the next five new build awards? I just wanted to confirm that you're still on track for over $300 million of adjusted EBITDA from SANAD for 2025.

William Restrepo (CFO)

Yeah.

There's been no change in the schedule. As we said in the prepared remarks, the next group is working its way through the system right now. Right now, we haven't seen any rethinking or backtracking on the new build program at all. Aramco has been pretty clear about it. Obviously, we're following their lead. I can never say never, but as far as we know right now, there's been no change in the schedule at all. Initially, Arun, just to give a little bit more color, we have discussions with Aramco on what their needs are, which are heavily oriented towards natural gas right now. Once that is determined, then we order the rig from the local provider based on an award. The award comes first, then we make appeal for the rig, and then we start building the rig.

That is how it works. If you look at the last year and a half, or Tony was talking about these suspensions and additions, we have had three rigs suspended, and mainly oil-type rigs and smaller rigs. We have added six new builds for Standard. So Nabors Industries Ltd is net +3 over that period.

Arun Jayaram (Research Analyst)

Understood. Great. My follow-up is a bit of a housekeeping question. In the slide deck, you guys highlighted how—this is on slide 25, just for reference—you gave us a pretty detailed EBITDA outlook for 2Q by segment. Could you give us a sense of what the corporate line item could look like in 2Q with the full quarter of contribution from Parker Wellbore? I believe the previous guide that you had in the March deck was about $48 million in annual corporate cost for Parker Wellbore, but I know there is some synergy capture.

Just trying to get what a good corporate run rate would be for the second quarter.

William Restrepo (CFO)

I think for the second quarter, of course, we will not have captured the full synergy. The Parker Wellbore contribution should increase throughout the remainder of the year. I think we've given sufficient guidance to construct what the EBITDA would be. Obviously, it'll be a very large increase given the Parker Wellbore full quarter contribution. We also think the legacy business will increase somewhat as well. I think the Parker Wellbore contribution as a whole for the company, though, we gave you some components, but I think the EBITDA for Parker Wellbore alone should be in the mid-40s for the company.

Arun Jayaram (Research Analyst)

Okay. Great. Thanks a lot, William.

Operator (participant)

The next question is from Keith Mackey with RBC. Please go ahead.

Keith Mackey (Director of Global Equity Research)

Hey, good morning, and thanks for taking my questions. Just wanted to start out—hey there.

Hey. Just wanted to start out on the survey that you talked about of your 14 customers with the rig count going down 4% through the end of the year. Just curious if on the timing on that, was that after the impact of the—or was that after the tariff announcements or during or before? Therefore, do you think that that impact would be reflected in that 4%, or is there likely some additional thinking that needs to be done based on that announcement on April 2nd?

Tony Petrello (Chairman, President and CEO)

Yes, it was after. It was after. The question is, does any of that get rethought? If things reverse itself, obviously, it is one outstanding issue. The other way, if things get worse, then does it get reassessed even more given that it happened right after the announcement? It was after.

That was taken into account by people, which I think that in part reflects in the numbers that you heard about. The interesting thing for us is that if you look at our mix of customer, in the first quarter, we had a huge shift in activity. I think we entered the quarter at the year-end at 64, and then we hit low of 58, and then we exited at 62. That mix was a mix where we shifted part of our customer base from the large publics and basically to privates a little bit. Even with that mix, if you look at our mix of customers, I think even relative to our competitors, we're dominated by the large customers in our basic mix, which I think does give us a little stability going forward because they tend to stick with it.

Although you can't make generalizations because some large independents in this market have aggressively moved to respond to things. It is hard to get one generalization, but I would note we had a little bit of shift in the customer mix to privates. Even with that, we're still dominated by the large publics.

Keith Mackey (Director of Global Equity Research)

Makes sense. Thanks for the color. Just on the international side, guiding to margins well above $17,000 per day, can you just talk to us a little bit more about the mix of the rigs you're adding in international versus the rigs that are going down in international? Are all of the, say, rigs you'd be adding accretive to your average margin, not just the Standard rigs?

Maybe help us think through that a little bit so we can get a better sense of where the margin could ultimately go through the year would be appreciated.

Tony Petrello (Chairman, President and CEO)

As I think directionally, there's no question that it should be accretive in the sense that the Standard new builds obviously are much higher day rate margins than our average today. Even the Kuwait rigs, of course, are also higher. In the second quarter, for example, you got five of those rigs are the Standard new builds and three are Kuwait. Right there, that should all be directionally accretive. In Latin America, it's somewhat accretive. I think it depends exactly on the type of rig. Rigs we deploy from the U.S. down there are typically also going to be accretive.

William Restrepo (CFO)

The ones that are going down are Russia, basically where negative cash flow and zero EBITDA kind of. That is certainly going to be good for our margins going forward on an average basis. Of the ones that are going down, the one that was meaningful was the one in Papua New Guinea. On the other hand, we also have a Mexico rig coming up, which is also high margins. I think all in all, high margins for the rigs coming on and low margins for most of the rigs that are going down.

Keith Mackey (Director of Global Equity Research)

Got it. One more, if I could sneak it in, just on the Standard new build timing from, say, award to delivery or award to when they start drilling. What roughly is that timing now?

How long would it take if you got an award, say, today to get a rig built in the field?

Tony Petrello (Chairman, President and CEO)

About one year from award to delivery.

William Restrepo (CFO)

By the way, we think over the next couple of months, we'll get the POs, the awards, and consequently order the rigs.

Keith Mackey (Director of Global Equity Research)

Got it. Okay. Thanks very much.

Tony Petrello (Chairman, President and CEO)

Yep. I'll just qualify that, though. It takes one year from award to delivery, but obviously, we do order the rigs for deliveries that are a little bit phased. We don't have all five rigs arriving on the same day. That would be not manageable in terms of bringing five rigs up at the same time.

Operator (participant)

The next question is from Jeff LeBlanc with TPH. Please go ahead.

Jeff LeBlanc (Director of Equity Research)

Good morning, Tony and team. Thank you for taking my question.

Tony Petrello (Chairman, President and CEO)

Sure.

Jeff LeBlanc (Director of Equity Research)

I just wanted to see if you could talk about Quail's exposure to the steel tariffs and how any tariffs are considered in the outlook for Quail and then Parker Wellbore more broadly. Thank you.

Tony Petrello (Chairman, President and CEO)

Yeah. I think there's going to be some impact, but we think the impact with logistics, as we refer to in terms of our sourcing capabilities, as well as customer negotiations, it should be a limited impact on Quail. I know NOV's comments about the tariffs in terms of their ability to deal with it. They are obviously one supplier, but not our only one. Some of the stuff has already been pre-planned. I think all in all, we think between customer responses and the other logistics aspects, we can handle it pretty well.

William Restrepo (CFO)

By the way, the majority is not coming from China.

We also are getting some deliveries from Europe and some from the U.S. The part that's from China needs to be mitigated. Obviously, conversations with clients will be very important in getting that part mitigated.

Jeff LeBlanc (Director of Equity Research)

Thank you very much for the call. I'll hand the call back to the operator. Thank you.

Operator (participant)

The final question is from John Daniel with Daniel Energy Partners. Please go ahead.

Tony Petrello (Chairman, President and CEO)

Good morning.

John Daniel (Founder and President)

Good morning, guys. Thanks for including me. I just have two quick ones. First, Tony, if the tariff conundrum persists, would you expect to see any pushback from international operators on U.S. service providers?

Tony Petrello (Chairman, President and CEO)

No.

John Daniel (Founder and President)

Okay.

Tony Petrello (Chairman, President and CEO)

How's that? I mean, I think the—yeah. I think the—

John Daniel (Founder and President)

That's fine. I'm just curious if you want to—

Tony Petrello (Chairman, President and CEO)

The amount of multidirectional transfers of stuff, I think, mitigates everything in the international part. Yep.

John Daniel (Founder and President)

When you all did the survey—

William Restrepo (CFO)

I think, me and John, that we're going to get a negative change for U.S. providers because the clients are upset at the U.S., or did you mean cost-wise?

John Daniel (Founder and President)

I'm just saying if they're pissed off at our policies and they want to push back on our industry, that's all.

Tony Petrello (Chairman, President and CEO)

No, I don't think so. We have a lot of other problems in the thing for people to push back on. I don't think translating that one problem to all the other jurisdictions is something that is happening right now.

John Daniel (Founder and President)

Fair enough. I was just curious. The second one, when you all did the survey this quarter, were you positively or negatively surprised by the responses?

Tony Petrello (Chairman, President and CEO)

I was actually positively surprised in the sense that with all the negativity out there, I was looking to see the numbers, especially given the timing that was going to be falling off the cliff. It would be falling off the cliff, but it was not, which is why I gave you some comments about our customer base as well. Yeah, I think from my own personal point of view, I do not know what speaking to the other operator guys, what they all thought, but from my own personal point of view, I was more pleasantly surprised because I thought, given what happened right after we did this, thing that panic would have been set in, but it had not happened yet. Again, whether there is a delayed reaction at work, I cannot tell you.

Obviously, with oil breaching $60 today, today is not the kind of day I want to have this kind of conference call on. Leaving those things aside, I think I was positively impacted.

William Restrepo (CFO)

By the way, I was even more positively impressed by the fact that our customer base tends to be a little bit skewed. We have a lot of majors and big guys, which are some of the guys that have been cutting because of the consolidation. That number seems really mitigated. More impressive to me is what the team has done because in the first quarter, we saw a lot of that as well, right? They have managed to replace the rigs with other clients that are not necessarily in our survey.

There has been some growth in other clients that have not been traditional clients for us over the past year or so. We have gained some ground with those clients to the point that our rig count went up quite a bit from our trough in the first quarter to where we are standing today.

Tony Petrello (Chairman, President and CEO)

Incidentally, we are at 64 today. We just hit 64.

William Restrepo (CFO)

We just got an email.

Tony Petrello (Chairman, President and CEO)

We just hit 64.

John Daniel (Founder and President)

There you go.

William Restrepo (CFO)

We just hit 64 today.

Tony Petrello (Chairman, President and CEO)

Like I said, I get it is always all in the context of what is happening in the world today. There are absolutely no guarantees about rig count, given what is happening in the world. That is for sure.

John Daniel (Founder and President)

Totally get it. All right. Hey, guys, thanks for including me.

Tony Petrello (Chairman, President and CEO)

Thank you, John.

William Restrepo (CFO)

Thanks, John.

Operator (participant)

This concludes our question and answer session.

I'd like to turn the conference back over to Mr. Conroy for any closing remarks.

William Conroy (VP of Corporate Development and Investor Relations)

Thank you, everyone, for joining us today. If you care to follow up, please reach out to us. Gaylene, with that, we will conclude the call.

Operator (participant)

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.