NABORS INDUSTRIES LTD

Previous wording

efficient and sustainable energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower carbon world.

Current wording

We are a leading provider of advanced technology for the energy industry. With operations in over 15 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and sustainable energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower carbon world.

Previous wording

The demand for our services and products is a function of the level of spending by oil and gas companies for exploration, development and production activities. The level of exploration, development and production activities is to a large extent tied to the prices of oil and natural gas, which can fluctuate significantly, are highly volatile and tend to be highly sensitive to factors including supply and demand cycles and geopolitical uncertainties particularly those impacting large hydrocarbon producing countries. Additionally, certain oil and gas companies may intentionally limit their capital spending as they focus on generating returns to shareholders as opposed to maximizing hydrocarbon production.

Current wording

The demand for our services and products is a function of the level of spending by oil and gas companies for exploration, development and production activities. The level of exploration, development and production activities is to a large extent tied to the prices of oil and natural gas, which can fluctuate significantly, are highly volatile and tend to be highly sensitive to factors including supply and demand cycles and geopolitical uncertainties particularly those impacting large hydrocarbon producing countries. Certain oil and gas companies may also intentionally limit their capital spending as they focus on generating returns to shareholders as opposed to maximizing hydrocarbon production. Additionally, there has recently been an increasing number of customer consolidations within the industry. In some cases, these transactions may have an impact on overall rig demand, as the acquiring company may apply criteria that results in a different level of demand for drilling rigs than the previous two companies would have had on a stand-alone basis.

Previous wording

Since late 2022 and through 2023, global energy commodity markets have experienced high levels of volatility. In the U.S., operators generally reacted to this market by reducing their drilling activity. Recent production actions announced by certain large international oil producers have been supportive of both oil prices and oil-focused activity broadly, especially in international markets. Natural gas prices, particularly in the United States, declined significantly through 2023 and into 2024.

Current wording

Since late 2022 and continuing through the second quarter of 2024, global energy commodity markets have experienced high levels of volatility. In the U.S., operators generally reacted to these market conditions by reducing their drilling activity. Recent production actions announced by certain large international oil producers have been supportive of both oil prices and oil-focused activity broadly, especially in international markets. Natural gas prices, particularly in the United States, declined significantly through 2023 and into 2024, to levels which have caused operators to reduce natural gas directed activity.

Previous wording

In early 2023 economic sentiment was overshadowed by a pervasive concern that a global recession would take hold. The U.S. Federal Reserve’s tightening of interest rates reduced capital availability in the U.S energy market. Rig counts in the U.S. Lower 48 continued to decline throughout the year. Despite the reduction in rig count, rig pricing discipline remained intact.

Current wording

In early 2023 economic sentiment was overshadowed by a pervasive concern that a global recession would take hold. The U.S. Federal Reserve’s tightening of interest rates reduced capital availability in the U.S energy market. As these higher interest rates continued, rig counts in the U.S. Lower 48 continued to decline throughout the year. Despite the reduction in rig count, rig pricing discipline remained intact, supporting rig dayrates and daily rig margins.

Previous wording

U.S. oil and gas production has proved resilient in 2024 in the face of reduced drilling activity. Internationally, we generally see an expansion of production capacity as well as the widespread development of unconventional resources driving an expected increase in oilfield activity across those markets.

Current wording

U.S. oil and gas production has proved resilient in 2024 in the face of reduced drilling activity. Internationally, we generally see an expansion of production capacity as well as the widespread development of unconventional resources driving an expected increase in oilfield activity broadly across those markets.

Previous wording

Operating revenues for the three months ended March 31, 2024 totaled $733.7 million, representing a decrease of $45.4 million, or 6%, compared to the three months ended March 31, 2023. For a more detailed description of operating results, see Segment Results of Operations below.

Current wording

Operating revenues for the three months ended June 30, 2024 totaled $734.8 million, representing a decrease of $32.3 million, or 4%, compared to the three months ended June 30, 2023. For a more detailed description of operating results, see Segment Results of Operations below.

Previous wording

Net loss attributable to Nabors totaled $34.3 million ($4.54 loss per diluted share) for the three months ended March 31, 2024 compared to a net income attributable to Nabors of $49.2 million ($4.11 per diluted share) for the three months ended March 31, 2023, or a $83.6 million decrease in net income. The decrease in net income is attributable to a decline in U.S. activity which has resulted in a decrease of approximately $14.6 million in adjusted operating income for our segments from the prior year. In addition, gains related to mark-to-market activity for the common share warrants and debt buybacks loss during the three months ended March 31, 2024 contributed approximately $3.1 million to net income compared to gains of $59.2 million during the three months ended March 31, 2023, contributing $56.1 million to the decrease. See Other Financial Information —Other, net below for additional discussion.

Current wording

Net loss attributable to Nabors totaled $32.3 million ($4.29 loss per diluted share) for the three months ended June 30, 2024 compared to a net income attributable to Nabors of $4.6 million ($0.31 loss per diluted share) for the three months ended June 30, 2023, or a $36.9 million decrease in net income. The decrease in net income is attributable to a decline in U.S. activity which has resulted in a decrease of approximately $18.3 million in adjusted operating income for our segments from the prior year. In addition, gains related to mark-to-market activity for the common share warrants during the three months ended June 30, 2024 contributed approximately $3.9 million to net income compared to gains of $17.9 million related to mark-to-market activity for the common share warrants during the three months ended June 30, 2023, contributing $14.0 million to the decrease in period over period net income. See Other Financial Information —Other, net below for additional discussion.

Previous wording

General and administrative expenses for the three months ended March 31, 2024 totaled $61.8 million, representing a minimal increase of $21 thousand compared to the three months ended March 31, 2023 as general operating costs remained consistent with prior year.

Current wording

General and administrative expenses for the three months ended June 30, 2024 totaled $62.2 million, representing a minimal decrease of $1.1 million compared to the three months ended June 30, 2023 as general operating costs remained consistent with prior year.

Previous wording

Research and engineering expenses for the three months ended March 31, 2024 totaled $13.9 million, representing a decrease of $1.2 million, or 8%, compared to the three months ended March 31, 2023. This is primarily reflective of a decrease in research and development activities due to current industry market conditions.

Current wording

Research and engineering expenses for the three months ended June 30, 2024 totaled $14.4 million, representing an increase of $1.1 million, or 8%, compared to the three months ended June 30, 2023. This is primarily reflective of an increase in research and development activities.

Previous wording

Operating revenues for our U.S. Drilling segment decreased by $78.7 million or 22% duringthe three months ended March 31, 2024 compared to the corresponding prior year period primarily due to a decrease in activity as reflected by a 22% decrease in the average number of rigs working, while pricing remained stable.

Current wording

Operating revenues for our U.S. Drilling segment decreased by $55.1 million or 18% duringthe three months ended June 30, 2024 compared to the corresponding prior year period primarily due to a decrease in activity as reflected by a 15% decrease in the average number of rigs working, while pricing remained stable.

Previous wording

Operating revenues for our International Drilling segment during thethree months ended March 31, 2024 increased by $29.3 million or 9% compared to the corresponding prior year period. The increase is primarily attributable to a 6% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our international drilling services have increased since the prior year.

Current wording

Operating revenues for our International Drilling segment during thethree months ended June 30, 2024 increased by $19.1 million or 6% compared to the corresponding prior year period. The increase is primarily attributable to a 9% increase in the average rigs working, reflecting increased drilling activity as market conditions and demand for our international drilling services have increased since the prior year.

Previous wording

Operating revenues for this segment increased by $0.5 million or 1% duringthe three months ended March 31, 2024 compared to the corresponding prior year period in 2023 as an increase in demand for our international and third-party services offset a decline in results in the U.S. markets, which was driven by the reduction in drilling activity.

Current wording

Operating revenues for this segment increased by $6.1 million or 8% duringthe three months ended June 30, 2024 compared to the corresponding prior year period in 2023 as an increase in demand for our international and third-party services offset a decline in results in the U.S. markets, which was driven by the reduction in drilling activity.

Previous wording

Interest expense for the three months ended March 31, 2024 was $50.4 million, representing an increase of $5.2 million, or 12%, compared to three months ended March 31, 2023. The increase was primarily due to an increase in our effective interest rate levels on our outstanding debt throughout the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Current wording

Interest expense for the three months ended June 30, 2024 was $51.5 million, representing an increase of $5.3 million, or 12%, compared to three months ended June 30, 2023. The increase was primarily due to an increase in our effective interest rate levels on our outstanding debt throughout the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Previous wording

Our worldwide tax expense for the three months ended March 31, 2024 was $16.0 million compared to $23.0 million for the three months ended March 31, 2023. The decrease in tax expense was primarily attributable to the change in amount and geographic mix of our pre-tax earnings (losses).

Current wording

Our worldwide tax expense for the three months ended June 30, 2024 was $15.6 million compared to $26.4 million for the three months ended June 30, 2023. The decrease in tax expense was primarily attributable to the change in amount and geographic mix of our pre-tax earnings (losses).

Previous wording

Depreciation and amortization expense for the three months ended March 31, 2024 was $157.7 million, representing a decrease of $5.3 million, or 3%, compared to the three months ended March 31, 2023. The decrease is a result of the limited capital expenditures over recent years coupled with a higher amount of older assets reaching the end of their useful lives.

Current wording

Depreciation and amortization expense for the six months ended June 30, 2024 was $317.8 million, representing a decrease of $4.9 million, or 2%, compared to the six months ended June 30, 2023. The decrease is a result of the limited capital expenditures over recent years coupled with a higher amount of older assets reaching the end of their useful lives.

Previous wording

Operating revenues for our Rig Technologies segment decreased by $8.3 million or 14% duringthe three months ended March 31, 2024 compared to the corresponding prior year period due to the overall decline in activity in the U.S. as mentioned previously. Adjusted operating income was relatively flat despite the 14% drop in operating revenues, due to a change in mix of business to the higher margin product lines.

Current wording

Operating revenues for our Rig Technologies segment decreased by $22.3 million or 18% duringthe six months ended June 30, 2024 compared to the corresponding prior year period due to the overall decline in activity in the U.S. as mentioned previously. Adjusted operating income was relatively flat despite the 18% drop in operating revenues, due to a change in mix of business focusing more on the higher margin product lines.

Previous wording

Other, net for the three months ended March 31, 2024 was a loss of $16.1 million compared to $42.4 million gain for the three months ended March 31, 2023 representing a $58.5 million decrease in income. During the three months ended March 31, 2024, the amount consisted of $11.4 million in foreign currency transaction losses, $4.6 million in loss on sales of assets, $2.6 million from increases in litigation reserves and $2.6 million of loss recognized for debt buybacks which was offset by $5.7 million of mark-to-market gains on the common share warrants. In comparison, the amount during the three months ended March 31, 2023 primarily consisted of $34.3 million mark-to-market gains for the common share warrants and $24.9 million related to net gains on debt buybacks offset by $7.1 million in costs related to energy transition initiatives.

Current wording

Other, net for the six months ended June 30, 2024 was a loss of $28.2 million compared to $44.2 million gain for the six months ended June 30, 2023 representing a $72.3 million decrease in income. During the six months ended June 30, 2024, the amount consisted of $17.9 million in foreign currency transaction losses, $9.5 million in loss on sales of assets, $4.3 million from increases in litigation reserves and $2.6 million of loss recognized for debt buybacks which was offset by $9.6 million of mark-to-market gains on the common share warrants. In comparison, the amount during the six months ended June 30, 2023 primarily consisted of $52.2 million mark-to-market gains for the common share warrants and $25.1 million related to net gains on debt buybacks offset by $16.8 million in foreign currency transaction losses, $7.7 million in costs related to energy transition initiatives and $7.2 million in litigation expenses.

Previous wording

Our primary sources of liquidity are cash and investments, availability under the 2022 Credit Agreement and cash generated from operations. As of March 31, 2024, we had cash and short-term investments of $425.6 million and working capital of $471.9 million. As of December 31, 2023, we had cash and short-term investments of $1.1 billion, which included proceeds from our offering of $650.0 million in aggregate principal of 9.125% senior priority guaranteed notes due 2030 that were used primarily to retire certain outstanding indebtedness during the first quarter of 2024, and working capital of $431.7 million.

Current wording

Our primary sources of liquidity are cash and investments, availability under the 2024 Credit Agreement and cash generated from operations. As of June 30, 2024, we had cash and short-term investments of $473.6 million and working capital of $486.9 million. As of December 31, 2023, we had cash and short-term investments of $1.1 billion, which included proceeds from our offering of $650.0 million in aggregate principal of 9.125% senior priority guaranteed notes due 2030 that were used primarily to retire certain outstanding indebtedness during the first quarter of 2024 and working capital of $431.7 million.

Previous wording

On March 31, 2024, we had no borrowings and $47.1 million of letters of credit outstanding under the 2022 Credit Agreement, which has a total borrowing capacity of $350.0 million.

Current wording

On June 30, 2024, we had no borrowings and $50.4 million of letters of credit outstanding under the 2024 Credit Agreement, which has a total borrowing capacity of $350.0 million and a separate letter of credit tranche that permits us to issue letters of credit with total reimbursement obligations not to exceed $125 million. Letters of credit issued will not affect revolving loan capacity and vice versa.

Previous wording

The 2022 Credit Agreement requires us to maintain an interest coverage ratio (EBITDA/interest expense of 2.625:1.00, which increases to 2.75:1.00 by June 30, 2024) and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. Additionally, the Company is subject to certain covenants (which are subject to certain exceptions) and include, among others, (a) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million, among other exceptions), (b) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness, and (c) a covenant restricting the ability of the Company’s subsidiaries to incur debt (subject to the grower basket of up to $100.0 million). The facility matures on January 21, 2026.

Current wording

The 2024 Credit Agreement requires us to maintain an interest coverage ratio (EBITDA/interest expense of 2.75:1.00) and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. Additionally, the Company is subject to certain covenants (which are subject to certain exceptions) and include, among others, (a) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million, among other exceptions), (b) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness, and (c) a covenant restricting the ability of the Company’s subsidiaries to incur debt (subject to the grower debt basket of up to $100.0 million). The facility matures on the earlier of (a) June 17, 2029 and (b) to the extent 10% or more of the respective principal amount of any of the 7.25% Senior Guaranteed Notes

Previous wording

As of the date of this report, we were in compliance with all covenants under the 2022 Credit Agreement, including those regarding the required interest coverage ratio and minimum guarantor value, which were 4.77:1.00 and 99.79%, respectively, as of March 31, 2024. If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2022 Credit Agreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2022 Credit Agreement during the twelve-month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.

Current wording

As of the date of this report, we were in compliance with all covenants under the 2024 Credit Agreement, including those regarding the required interest coverage ratio and minimum guarantor value, which were 4.60:1.00 and 99.79%, respectively, as of June 30, 2024. If we fail to perform our obligations under the covenants, the revolving credit commitments under the 2024 Credit Agreement could be terminated, and any outstanding borrowings under the facilities could be declared immediately due and payable. If necessary, we have the ability to manage our covenant compliance by taking certain actions including reductions in discretionary capital or other types of controllable expenditures, monetization of assets, amending or renegotiating the revolving credit agreement, accessing capital markets through a variety of alternative methods, or any combination of these alternatives. We expect to remain in compliance with all covenants under the 2024 Credit Agreement during the twelve-month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.

Previous wording

We had 8 letter-of-credit facilities with various banks as of March 31, 2024. Availability under these facilities as of March 31, 2024 was as follows:

Current wording

We had 9 letter-of-credit facilities with various banks as of June 30, 2024. Availability under these facilities as of June 30, 2024 was as follows:

Previous wording

Over the term of the facility, we entered into a number of amendments. Most recently, on April 1, 2024, we entered into the Fourth Amendment to the A/R Purchase Agreement, which among other things, extended the term of the A/R Purchase Agreement to the earliest of (i) April 1, 2027, (ii) the date that is ninety (90) calendar days prior to the occurrence of the maturity date under and as defined in the Credit Agreement and (iii) if any of the principal amount of the 7.25% Senior Guaranteed Notes are outstanding as of October 15, 2025, then October 15, 2025.

Current wording

Over the term of the facility, we entered into a number of amendments. Most recently, on April 1, 2024, we entered into the Fourth Amendment to the A/R Purchase Agreement, which among other things, extended the term of the A/R Purchase Agreement to the earliest of (i) April 1, 2027, (ii) the date that is ninety (90) calendar days prior to the occurrence of the maturity date under and as defined in the 2024 Credit Agreement and (iii) if any of the principal amount of the 7.25% Senior Guaranteed Notes are outstanding as of October 15, 2025, then October 15, 2025.

Previous wording

The amount available for purchase under the A/R Agreements fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the Purchasers under the A/R Agreements is $250.0 million and the amount of receivables purchased by the third-party Purchasers as of March 31, 2024 was $157.0 million.

Current wording

The amount available for purchase under the A/R Agreements fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after excluding excess concentrations and certain other ineligible receivables. The maximum purchase commitment of the Purchasers under the A/R Agreements is $250.0 million and the amount of receivables purchased by the third-party Purchasers as of June 30, 2024 was $156.0 million.

Previous wording

Purchase commitments outstanding at March 31, 2024 totaled approximately $302.8 million, primarily for capital expenditures, other operating expenses and purchases of inventory. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures over the next 12 months represent a number of capital programs that are currently underway or planned.

Current wording

Purchase commitments outstanding at June 30, 2024 totaled approximately $266.8 million, primarily for capital expenditures, other operating expenses and purchases of inventory. We can reduce planned expenditures if necessary or increase them if market conditions and new business opportunities warrant it. The level of our outstanding purchase commitments and our expected level of capital expenditures over the next 12 months represent a number of capital programs that are currently underway or planned.

Previous wording

Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, dividends, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our cash flows for the three months ended March 31, 2024 and 2023 below.

Current wording

Our cash flows depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities. Sustained decreases in the price of oil or natural gas could have a material impact on these activities and could also materially affect our cash flows. Certain sources and uses of cash, such as the level of discretionary capital expenditures or acquisitions, purchases and sales of investments, dividends, loans, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions. We discuss our cash flows for the six months ended June 30, 2024 and 2023 below.

Previous wording

Operating Activities**.**Net cash provided by operating activities totaled $107.2 million during the three months ended March 31, 2024, compared to net cash provided of $154.1 million during the corresponding 2023 period. Operating cash flows are our primary source of capital and liquidity. Cash from operating results (before working capital changes) was $174.9 million for the three months ended March 31, 2024, a decrease of $12.3 million when compared to $187.2 million in the corresponding 2023 period. This was due to the decrease in activity across our business for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Changes in working capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are also significant factors affecting operating cash flows and can be highly volatile in periods of increasing or decreasing activity levels. Changes in working capital items used $67.7 million in cash flows during the three months ended March 31, 2024, a $34.5 million unfavorable change as compared to the $33.1 million in cash flows used by working capital in the corresponding 2023 period.

Current wording

Operating Activities**.**Net cash provided by operating activities totaled $288.9 million during the six months ended June 30, 2024, compared to net cash provided of $322.5 million during the corresponding 2023 period. Operating cash flows are our primary source of capital and liquidity. Cash from operating results (before working capital changes) was $344.3 million for the six months ended June 30, 2024, a decrease of $25.1 million when compared to $369.3 million in the corresponding 2023 period. This was due to the decrease in activity across our business for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Changes in working capital items such as collection of receivables, other deferred revenue arrangements and payments of operating payables are also significant factors affecting operating cash flows and can be highly volatile in periods of increasing or decreasing activity levels. Changes in working capital items used $55.4 million in cash flows during the six months ended June 30, 2024, a $8.5 million unfavorable change as compared to the $46.8 million in cash flows used by working capital in the corresponding 2023 period.

Previous wording

Investing Activities**.**Net cash used for investing activities totaled $106.6 million during the three months ended March 31, 2024 compared to net cash used of $128.1 million during the corresponding 2023 period. Our primary use of cash for investing activities is capital expenditures for rig-related enhancements, new construction and equipment, and

Current wording

Investing Activities**.**Net cash used for investing activities totaled $227.1 million during the six months ended June 30, 2024 compared to net cash used of $283.0 million during the corresponding 2023 period. Our primary use of cash for investing activities is capital expenditures for rig-related enhancements, new construction and equipment, and sustaining capital expenditures. During the six months ended June 30, 2024 and 2023, we used cash for capital expenditures totaling $232.0 million and $263.5 million, respectively.

Previous wording

Financing Activities**.**Net cash used by financing activities totaled $635.1 million during the three months ended March 31, 2024. During the three months ended March 31, 2024, we repaid $631.0 million of outstanding long-term debt.

Current wording

Financing Activities**.**Net cash used by financing activities totaled $636.3 million during the six months ended June 30, 2024. During the six months ended June 30, 2024, we repaid $631.0 million of outstanding long-term debt.

Previous wording

Net cash provided by financing activities totaled $2.3 million during the three months ended March 31, 2023. During the three months ended March 31, 2023, we received proceeds of $250.0 million from issuance of the 1.75% Exchangeable Notes and repaid $232.5 million of outstanding long-term debt.

Current wording

Net cash used by financing activities totaled $247.4 million during the six months ended June 30, 2023. During the six months ended June 30, 2023, we received proceeds of $250.0 million from issuance of the 1.75% Exchangeable Notes, repaid $292.9 million of outstanding long-term debt and made a distribution of $186.9 million from the Trust Account to NETC stockholders who exercised their right to redemption of their shares.