NABORS INDUSTRIES LTD (NBR)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered mixed operational results: operating revenues fell to $818,190 (USD thousands) vs. $832,788 in Q2, and adjusted EBITDA declined to $236,308 (USD thousands) vs. $248,459, while GAAP diluted EPS surged to $16.85 on a one-time, after-tax gain from the Quail Tools sale ($314 million; $20.52 per diluted share) .
• International Drilling outperformed on deployments and margin expansion (daily adjusted gross margin $17,931), while Lower 48 margins compressed amid churn and higher repair/maintenance; U.S. Offshore/Alaska exceeded internal expectations .
• Guidance for Q4: Lower 48 rig count 57–59 and daily adjusted gross margin ~$13,000; International rig count ~91 and daily adjusted gross margin $18,100–$18,200; NDS EBITDA ~$39 million; CapEx $180–$190 million; adjusted FCF ~$10 million .
• Near-term stock reaction catalysts: deleveraging from Quail proceeds and refinancing (redeemed $150 million of 2027 notes; ratings upgraded by S&P and Fitch; upsized $700 million senior priority guaranteed notes at 7.625% to redeem 2027s), plus SANAD rig resumptions notice for 2026 .

What Went Well and What Went Wrong

What Went Well

• International strength: Adjusted EBITDA rose to $127.6 million with +3 rigs added (India, Kuwait, Saudi), and daily adjusted gross margin reached $17,931 (upper end of prior guidance), driven by high-margin additions and operational improvements .
• U.S. Offshore/Alaska outperformed: Combined EBITDA exceeded internal forecasts; Alaska North Slope remains constructive with multiple future projects tracked .
• Strategic capital actions: Completed Quail Tools sale ($625 million total consideration), repaid revolver, redeemed $150 million 2027 notes; pro forma net debt would have been ~$1,670 million after seller note repayment . “We have already used a portion of the proceeds to reduce our gross debt by approximately $330 million… annual interest expense should decline by approximately $45 million” — CEO Anthony Petrello .

What Went Wrong

• Lower 48 margin pressure: Average daily adjusted gross margin fell to $13,151 (–5.4% seq.), impacted by labor inefficiencies, churn, and higher repair/maintenance amid harsher drilling conditions; daily revenue rose modestly but did not drop to the bottom line .
• Drilling Solutions normalization: Segment adjusted EBITDA fell to $60.7 million vs. $76.5 million in Q2 as Quail contributed only partial-quarter ($20.3 million vs. $37.0 million in Q2); excluding Quail, NDS EBITDA grew slightly .
• Mexico collections: Adjusted free cash flow was $6 million; collections from the main client (Pemex) were substantially below expectations, delaying FCF improvement despite partial offsets from lower capex .

Financial Results

Segment operating revenues

Segment adjusted EBITDA

Operational KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “The sale of Quail Tools is a transformative event for Nabors… expected decrease to our gross debt will exceed 20%… annual interest expense should decline by approximately $45 million” — Anthony G. Petrello, CEO .
• “International drilling… daily drilling margins… on the verge of exceeding the $18,000 mark” and “U.S. Offshore and Alaska operations continued to perform well” .
• “EBITDA was $236.3 million… exceeded expectations we laid out in September after the sale of Quail Tools… International Drilling and NDS (ex-Quail) grew sequentially” — Miguel Rodriguez, CFO .
• On technology: “We deployed the most powerful rig in the Lower 48… PACE-X Ultra… performance exceeded expectations… averaged more than 240 feet per hour” .
• On Saudi tenders and suspended rigs: “Potentially 50% of these suspended rigs would come back to work… SANAD answered the tender for our three rigs” .

Q&A Highlights

• Lower 48 margin path: Management aims to translate performance bonuses into margin, stabilize leading-edge dayrates in low-$30k; guiding ~$13,000 daily adjusted gross margin with lower OpEx in Q4 .
• Saudi tender and suspended rigs: Market discussing reactivating ~50% of suspended land rigs; SANAD’s three suspended rigs were tendered; clarity expected in Q4 .
• Deleveraging targets: CFO outlined gross debt path toward ~$2.1 billion with $250mm proceeds; aspirational net debt in $1.1–$1.2 billion range longer term .
• International unconventional growth: Argentina rigs to 13 by early 2026; broader gas-led opportunities in Middle East/LatAm; potential LNG in Argentina .

Estimates Context

Consensus vs. actual (S&P Global):

Note: EPS consensus appears to reflect normalized/continuing operations and excludes the one-time gain from the Quail Tools sale, while GAAP diluted EPS was $16.85 due to the after-tax gain .
Values retrieved from S&P Global.*

Key Takeaways for Investors

• International-led resilience: Margin expansion and rig additions in Eastern Hemisphere underpin EBITDA growth even as Lower 48 remains volatile .
• Deleveraging underway: Quail proceeds drove revolver repayment and $150mm note redemption; ratings upgrades and new 2032 notes (7.625%) enhance refinancing flexibility .
• Near-term margin pressure in Lower 48 likely persists: Churn and harsher drilling conditions raise costs; expect ~$13,000 daily adjusted gross margin in Q4; watch contract repricing .
• NDS reset post-Quail: Q4 guidance ~$39mm EBITDA implies normalization; monitor penetration and mix improvements to offset Lower 48 softness .
• Mexico collections are the swing factor for FCF: Timing delays depressed Q3 FCF; management expects Q4 improvement but remains cautious .
• SANAD optionality: Fifth tranche discussions and potential reactivation of suspended rigs could lift 2026–2027 visibility; gas focus aligns with fleet capability .
• Trading implications: Near term, stock likely keys off deleveraging pace and FCF cadence; medium term, International growth and technology-led performance (PACE-X Ultra, automation) can drive multiple expansion if margins stabilize .

Other Relevant Press Releases (Q3/Q4 context)

• SANAD JV received notices to resume work for two previously suspended rigs (expected March/June 2026); contracts extended for suspension periods .
• S&P and Fitch upgraded elements of Nabors’ debt; S&P issuer rating to ‘B’ (stable), Fitch IDR to ‘B’ (stable) .
• Priced $700 million Senior Priority Guaranteed Notes due 2032 at 7.625%, upsized from $550 million; proceeds to redeem 2027 notes .