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NABORS INDUSTRIES LTD (NBR)·Q1 2025 Earnings Summary

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 .

Financial Results

Overall performance vs prior periods

MetricQ3 2024 (oldest)Q4 2024Q1 2025 (newest)
Operating Revenues ($M)$731.8 $729.8 $736.2
Diluted EPS (GAAP)$(6.86) $(6.67) $2.18
Adjusted EBITDA ($M)$221.7 $220.5 $206.3

Q1 2025 actuals vs S&P Global consensus

MetricConsensus*Actual
Revenue ($M)$718.0*$736.2
Adjusted EBITDA ($M)$210.9*$206.3
Primary EPS-$3.48*-$3.24*

Values marked with * retrieved from S&P Global.

Segment breakdown

SegmentQ1 2024Q4 2024Q1 2025
Operating Revenues ($M) U.S. Drilling$272.0 $241.6 $230.7
Operating Revenues ($M) International Drilling$349.4 $371.4 $381.7
Operating Revenues ($M) Drilling Solutions$75.6 $76.0 $93.2
Operating Revenues ($M) Rig Technologies$50.2 $56.2 $44.2
Adjusted EBITDA ($M) U.S. Drilling$120.4 $105.8 $92.7
Adjusted EBITDA ($M) International Drilling$102.5 $112.0 $115.5
Adjusted EBITDA ($M) Drilling Solutions$31.8 $33.8 $40.9
Adjusted EBITDA ($M) Rig Technologies$6.8 $9.2 $5.6

KPIs and balance sheet/cash flow

KPIQ1 2024Q4 2024Q1 2025
Lower 48 Daily Adjusted Gross Margin ($/day)$16,011 $14,940 $14,276
International Daily Adjusted Gross Margin ($/day)$16,061 $16,687 $17,421
Lower 48 Avg Rigs Working71.9 65.9 60.6
International Avg Rigs Working81.0 84.8 85.0
NDS Gross Margin (%)—53% 53%
Net Debt ($M)—$2,107.9 $2,281.1
Adjusted Free Cash Flow ($M)$8.1 $(53.3) $(71.4)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Lower 48 Avg Rig CountQ2 2025n/a63–64 rigs New
Lower 48 Daily Adj. Gross MarginQ2 2025n/a~$14,100/day New
Alaska + GoM Adjusted EBITDAQ2 2025n/a~ $26M New
International Avg Rig CountQ2 2025n/a85–86 rigs New
International Daily Adj. Gross MarginQ2 2025n/a~$17,700/day New
Drilling Solutions (NDS) EBITDAQ2 2025n/a~ $75M incl. ~$43M Parker New
Rig Technologies EBITDAQ2 2025n/a~ in line with Q1 New
CapexQ2 2025$195–$205M for Q1; FY $710–$720M $220–$230M in Q2; FY ~$770–$780M Raised
Adjusted Free Cash FlowFY 2025~ Breakeven ~ $80M ex‑tariffs; SANAD ~$(150)M, other ops +Parker ~+$230M Improved

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
International marginsCrossed $17K/day; strength in KSA/LatAm Daily margin $16,687; startups/suspensions in KSA $17,421/day; guide to $17,700 in Q2 Improving
SANAD newbuild program6–9 newbuild cadence, visibility to more in 2025–26 9th deployed; two more expected in Q1’25 10th deployed in Q1; 11th in April; 12th later in Q2; 15 by early 2026 Accelerating
Lower 48 pricing/marginsStable leading‑edge; margins ~$15K/day Margins held near $15K; consolidation pressures Margins fell to ~$14.3K on churn; guide ~$14.1K in Q2 Softening
Tariffs/macroNot a focusNot a focusPotential $10–$20M FCF hit; mitigation via sourcing/customer negotiations New headwind
Mexico collectionsNoted payment halt in Q4 Shortfall impacted Q4 FCF Collected ~$20M in Q1; expecting further payments in Q2 Improving
Technology/automationPowerTAP, tech adoption —Halliburton/Nabors closed‑loop automation milestone in Oman Positive
M&A integration (Parker)Announced deal, $35M synergies target Shareholder approvals, close expected Q1’25 Closed Mar 11; $40M synergies targeted; ~$150M 2025 EBITDA from Parker Accretive
DeleveragingIssued notes; push maturities Focus on debt reduction Retired Parker high‑rate debt via revolver; plan term loan refi Ongoing

Management Commentary

  • “With the acquisition of Parker completed, we are already realizing the benefits we anticipated… Our first quarter results reflect improving performance in certain international markets, as well as challenges in the U.S.” — Tony Petrello .
  • “The addition of Parker marks a significant milestone… With a full quarter of Parker, we expect NDS results in the second quarter to account for approximately 25% of adjusted EBITDA… on track to realize $40 million of cost synergies.” — CFO William Restrepo .
  • “Daily adjusted gross margin in the International Drilling business was $17,421, an improvement of more than $700 per day.” — Tony Petrello .
  • “We estimate [tariff] impact would land between $10 million and $20 million on a full-year basis… some of this impact would be offset by commercial negotiations with our customers.” — CFO .
  • “SANAD… began operating its tenth newbuild rig during the first quarter… another three are scheduled to commence operations during the balance of 2025.” — Press release .

Q&A Highlights

  • SANAD value realization: Management acknowledged an IPO of SANAD is a clear path under consideration with Aramco to crystallize value, citing higher regional multiples .
  • Tariff impact mechanics: Exposure primarily to spares/pumps sourced from China; company sees mitigation via alternate vendors/logistics and customer negotiations; $10–$20M FCF impact estimate assumes 145% China tariffs .
  • Mexico update: Pemex plans to restart a rig; company collected ~$20M in Q1 and is pursuing a larger Q2 payment .
  • Parker synergies/EBITDA: Additional overlap uncovered post‑close; corporate cost reductions higher than initial plan; Parker EBITDA expected “mid‑$40s” in Q2, with ~$43M of NDS in Q2 from Parker .
  • Lower 48 survey and activity: Post‑tariff‑announcement survey of 14 customers implied ~4% rig count decline through year‑end; Nabors replaced churn with new contracts and sees slight rig count uptick; churn pressures margins .

Estimates Context

  • Q1 2025 vs S&P Global: Revenue beat ($736.2M vs $718.0M*), Adjusted EBITDA slight miss ($206.3M vs $210.9M*), S&P Primary EPS actual -$3.24 vs -$3.48*; note GAAP diluted EPS was $2.18 due to one‑time bargain purchase gain . Values marked with * retrieved from S&P Global.
  • Forward look: Q2 2025 S&P Global consensus implies Revenue $845.4M*, EBITDA $247.3M*, Primary EPS -$1.51*; management’s Q2 operational guidance (higher International margins, strong NDS with full-quarter Parker at $43M) appears supportive of EBITDA but Lower 48 margin guide ($14.1K/day) is a headwind; mix and timing of deployments/collections could drive estimate revisions. Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • International execution and SANAD ramp are the near‑term earnings and FCF engines; Q2 guide to $17.7K/day underscores continuing margin expansion .
  • Parker is tracking accretive: NDS step‑up in Q2 (~$75M EBITDA incl. ~$43M from Parker) and $40M 2025 synergy plan should raise mix quality and cash conversion .
  • U.S. Lower 48 remains the swing factor; elevated churn and slight leading‑edge pricing erosion pressure daily margins (~$14.1K guided), so cost actions and rig mix will be critical .
  • FY25 capex increased with Parker and SANAD cadence ($770–$780M), but adjusted FCF now guided to ~$80M ex‑tariffs, implying better cash generation outside SANAD and synergy capture .
  • Tariff risk (FCF -$10–$20M potential hit) is mitigable via re‑sourcing and customer pass‑through; monitor policy trajectory and supply chain execution .
  • Possible SANAD monetization (e.g., IPO) represents a medium‑term rerating lever given regional multiples; watch for further disclosures on timing .
  • Balance sheet actions continue (retired Parker debt; planned term loan refi); stronger FCF and SANAD scaling support deleveraging over 2025 .

Additional detail and data citations:

  • Q1 2025 financials, segment metrics, rig activity, non‑GAAP reconciliations and net debt from 8‑K/Press Release .
  • Q2 2025 operating guidance and FY25 capex/FCF guide .
  • Prior quarter comps: Q4 2024 press release ; Q3 2024 press release .
  • Strategic updates: Parker close (Mar 12, 2025) ; Halliburton/Nabors automation in Oman ; CFO retirement and succession plan .
  • Earnings call remarks and Q&A .