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NABORS INDUSTRIES LTD (NBR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was operationally steady but cash‑flow constrained: operating revenue was $729.8M vs. $731.8M in Q3; adjusted EBITDA was $220.5M vs. $221.7M; diluted EPS was $(6.67) vs. $(6.86) in Q3 .
  • Segment mix was mixed: International EBITDA dipped on Saudi suspensions, U.S. Drilling softened on rig churn, while Rig Technologies EBITDA rose 51% on stronger Middle East shipments; NDS gross margin exceeded 54% .
  • 2025 outlook: Q1 guide calls for L48 average rig count ~61 and daily adjusted gross margin ~$14,800; International rig count 85–86 with daily margin ~$17,000; Q1 capex $195–$205M; full‑year 2025 capex $710–$720M with ~$360M SANAD; consolidated adjusted FCF ~breakeven (SANAD $(150)M; ex‑SANAD +$150M) .
  • Stock reaction catalysts: closing Parker Wellbore in Q1 with ≥$35M run‑rate synergies and incremental FCF; debate around SANAD’s near‑term cash usage vs. long‑term value; Mexico receivables catch‑up (~$50M) timing .

What Went Well and What Went Wrong

  • What Went Well

    • Rig Technologies strength: adjusted EBITDA rose 51% q/q to $9.2M on Middle East equipment shipments .
    • NDS profitability: Drilling Solutions posted >54% gross margin; management called it a record, validating the portfolio’s value proposition .
    • International expansion: deployed SANAD’s ninth newbuild and added Argentina rigs; pipeline across MENA/LatAm supports future awards and margin progression .
    • Quote: “SANAD’s expansion remains one of our most exciting investment opportunities…we believe the JV will start generating cash flow in excess of annual investment in the next several years” .
    • Quote: “We are looking forward to adding Parker…confident that this acquisition will advance our strategic objectives while creating value” .

  • What Went Wrong

    • Adjusted FCF usage: $(53)M in Q4 driven by ~$50M Mexico collections shortfall and higher capex (gross ~$241M, above the ~$230M Q4 target) .
    • U.S. Lower 48 softness: average rig count fell to 65.9 (from 67.8 in Q3); daily adjusted gross margin eased to $14,940 (from $15,051) .
    • Saudi suspensions: International daily adjusted gross margin dipped to ~$16,700 (down ~$400 q/q), offsetting contributions from new deployments .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Operating Revenues ($M)$725.8 $731.8 $729.8
Net Income (Loss) Attrib. to Nabors ($M)$(16.7) $(55.8) $(53.7)
Diluted EPS ($)$(2.70) $(6.86) $(6.67)
Adjusted EBITDA ($M)$230.1 $221.7 $220.5
Adjusted Operating Income ($M)$68.9 $62.5 $64.2
EBITDA Margin (Adj. EBITDA/Op. Rev.)Q4 2023Q3 2024Q4 2024
%31.7% (=$230.1/$725.8) 30.3% (=$221.7/$731.8) 30.2% (=$220.5/$729.8)

Segment operating revenue and adjusted EBITDA

SegmentQ2 2024Q3 2024Q4 2024
U.S. Drilling Revenues ($M)$259.7 $254.8 $241.6
International Drilling Revenues ($M)$356.7 $368.6 $371.4
Drilling Solutions Revenues ($M)$83.0 $79.5 $76.0
Rig Technologies Revenues ($M)$49.5 $45.8 $56.2
U.S. Drilling Adj. EBITDA ($M)$114.0 $108.7 $105.8
International Drilling Adj. EBITDA ($M)$106.4 $116.0 $112.0
Drilling Solutions Adj. EBITDA ($M)$32.5 $34.3 $33.8
Rig Technologies Adj. EBITDA ($M)$7.3 $6.1 $9.2

Key operating KPIs

KPIQ3 2024Q4 2024
Lower 48 Avg Rigs Working67.8 65.9
International Avg Rigs Working84.7 84.8
Lower 48 Daily Adjusted Gross Margin ($)$15,051 $14,940
International Daily Adjusted Gross Margin ($)$17,085 $16,687
Consolidated Adjusted FCF ($M)$17.5 $(53.3)
Net Debt ($M)$2,044 $2,108

Estimates vs. actuals

  • S&P Global (Capital IQ) consensus for Q4 2024 could not be retrieved due to provider rate limits; as a result, we cannot assess beat/miss vs. Wall Street at this time. We will update when SPGI data becomes available.

Guidance Changes

Q1 2025 and FY 2025 outlook (new items)

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Lower 48 avg rig countQ1 2025N/A~61 rigs New
Lower 48 daily adj. gross marginQ1 2025N/A~$14,800 New
Alaska+GOM EBITDAQ1 2025N/A~in line with Q4’24 New
International avg rig countQ1 2025N/A85–86 rigs New
International daily adj. gross marginQ1 2025N/A~$17,000 New
Drilling Solutions EBITDAQ1 2025N/A~$33M New
Rig Technologies EBITDAQ1 2025N/A~$5M New
CapexQ1 2025N/A$195–$205M; SANAD $80–$85M New
CapexFY 2025N/A~$710–$720M; SANAD ~$360M New
Adjusted Free Cash FlowFY 2025N/A~breakeven; SANAD $(150)M; ex‑SANAD +$150M New

Q4 2024 guidance vs actuals (from Q3 guide)

MetricPeriodPrior Guidance (as of Q3 release)ActualResult
L48 avg rig countQ4 2024~68 rigs 65.9 Below
L48 daily adj. gross marginQ4 2024~$15,000 $14,940 In line/slight miss
International avg rig countQ4 2024~84 rigs 84.8 In line
International daily adj. gross marginQ4 2024~$17,000 $16,687 Slight miss
Drilling Solutions EBITDAQ4 2024$36–$37M $33.8M Below
Rig Technologies EBITDAQ4 2024$9–$10M $9.2M In range
Capex (gross)Q4 2024~$230M ~$241M (actual) Above target

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
SANAD newbuild program19 deployments over 18 months; capex stepping up; strong International margin trajectory International daily margin >$17K; Saudi suspensions offset new starts; capex pull‑forward from supplier 9th newbuild deployed; 2 more to start in Q1’25; ~double 2025 newbuild EBITDA vs 2024; SANAD FCF breakeven in 2027–2028 discussed Positive long‑term; near‑term cash usage
Lower 48 pricing/rig churnStable pricing; L48 daily margin ~$15.6K; moderate rig additions expected Pricing discipline; margin >$15K; rig count just under prior quarter Daily margins “attractive” but rig churn; Q1 guide: margin ~$14.8K, rigs ~61; flattish 2025 outlook Flat/soft near term
International expansion (LatAm/MENA)Adds in Algeria/Saudi; Kuwait awards; pipeline supports growth 13 deployments scheduled through early 2026; margin uplift in KSA/LatAm 10 deployments planned in 2025 across KSA, Kuwait, Argentina, Colombia; strong tendering Broadening growth
Working capital/MexicoStrong H1 FCF; no Mexico issue noted Q4 capex guide lifted on supplier milestones Q4 adjusted FCF hit by ~$50M Mexico collections delay; catch‑up expected H1’25 Temporary headwind
Parker acquisition/synergiesAnnounced; $180M 2024E EBITDA, ≥$35M synergies; deleveraging benefits Ongoing planning Shareholder approvals; close targeted Q1; ≥$35M 2025 annualized synergies; incremental FCF Closing catalyst

Management Commentary

  • Strategic posture: “Our integration planning reinforces the Parker attributes that we identified earlier…this acquisition will advance our strategic objectives while creating value for our stakeholders.” — Anthony G. Petrello, CEO .
  • U.S. outlook: “Leading edge pricing…remained relatively stable. Daily rig margins…at attractive levels…we are responding with actions to improve efficiency and align our cost structure.” — CEO .
  • International growth: “We have startups planned in the Kingdom, Argentina, Colombia, and Kuwait. We project these deployments will drive this segment’s margins higher through the year.” — CEO .
  • SANAD economics: “6‑year initial contracts…recover the invested capital over five years…followed by a 4‑year renewal…SANAD’s working newbuild fleet should approximately double its contribution in adjusted EBITDA over 2024.” — Company .
  • Cash flow frame: “Adjusted free cash flow for 2025 [is] approximately breakeven…SANAD consuming approximately $150 million, while the remaining operations should generate around $150 million.” — Company .
  • U.S. market realism: “At this point, we see limited indication of a near-term recovery in the Lower 48 drilling rig market…our daily gross margin has remained around $15,000.” — CFO .

Q&A Highlights

  • Debt reduction vs. FCF mix: Outside SANAD, Nabors expects ~+$150M FCF in 2025, which management plans to allocate to gross debt reduction; SANAD ~$(150)M due to newbuild capex, implying consolidated ~breakeven FCF .
  • Saudi dynamics: Management does not expect further meaningful reductions in Saudi rig count given gas‑focused fleet and Aramco’s sustained commitment to newbuild cadence; awards for the next batch are anticipated in H1’25 .
  • SANAD per‑rig EBITDA and capex cadence: Newer rigs tracking ~$13M/rig EBITDA (higher rig spec/cost recovered via rate); 2025 SANAD capex ~“$310M” for 5 rigs (milestone timing can lift the cash spend to ~$360M) .
  • Mexico collections/working capital: ~$50M receivable delay expected to catch up in H1’25; management expects DSOs to improve modestly in 2025; cash taxes ~ $50M .
  • Argentina repatriation: New operating model allows cash/profits extraction in USD; regulatory moves are improving cash movement .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS, revenue, and EBITDA was unavailable at time of analysis due to provider rate limit; we will refresh and quantify beat/miss vs. Street once accessible. Until then, avoid trading conclusions based on estimate deltas.

Key Takeaways for Investors

  • International remains the growth flywheel (MENA/LatAm), with 2025 deployments and tendering likely to lift activity and margins through the year .
  • U.S. Lower 48 is flattish in early 2025 with rig churn, but pricing/daily margins are holding; management is aligning cost structure to stabilize profitability .
  • SANAD is a long‑duration value driver (5‑year payback, 10‑year utilization), but remains a near‑term FCF headwind; H2’27–’28 breakeven discussed as cadence builds .
  • Parker close in Q1 would add EBITDA/FCF and ≥$35M synergies, strengthening NDS and tubular rentals positioning; integration execution is a catalyst to watch .
  • Working capital sensitivity (Mexico) and milestone timing can swing quarterly FCF; management expects Mexico catch‑up by H1’25 and net debt reduction using ex‑SANAD FCF .
  • Short‑term: trading skew likely tied to Parker closing progress, Mexico collections, and any incremental Saudi awards. Medium‑term: delivery on International margin uplift and SANAD cadence will drive multiple and leverage trajectory .