Nabors Industries is growing its international footprint, boosted by its third-quarter 2024 performance and the recently announced acquisition of Parker Wellbore for $370 million.
Third-quarter earnings came in above analysts’ estimates overall, according to TPH & Co. analyst Jeff LeBlanc. Nabors’ reported EBITDA of $222 million for the third quarter, $3 million more than TPH’s estimate.
To add to Nabors’ high performance internationally, the acquisition of Parker Wellbore will enhance Nabors’ drilling solutions business and expand its international footprint, Nabors President and CEO Tony Petrello said in the company’s Oct. 23 third-quarter earnings call.
Nabors reported a sequential 5.7% increase in adjusted EBITDA within its Drilling Solutions segment for the third quarter, attributed to growth in international markets.
“Parker’s portfolio of businesses and geographic footprint fit neatly into Nabors,” Petrello said. “We believe the acquisition accelerates our strategy, particularly in our Drilling Solutions segment. We see excellent growth prospects at Parker, especially for Quail Tools.”
The acquisition is expected to contribute $180 million in EBITDA for 2024 and comes with a low debt profile and a clean balance sheet in alignment with Nabors’ long-term strategy.
Going forward, the company sees strong international demand and opportunities across various regions.
“For Nabors, the international markets remain a source of strong growth. Our prior rig awards are progressing into deployments and incremental EBITDA,” Petrello said. “We have three more international rigs expected to start by the end of 2024.”
Overall, the average global rig count remained stable at 159, with a slight increase in international rigs despite a modest decline in the U.S. rig count.
Nabors successfully deployed its last of four rigs in Algeria, reactivating idle units to meet demand. And the company has plans to begin operations with rigs in Argentina and provide upgrades in Kuwait, with expectations for further growth in 2025.
But despite progress in Kuwait, its other Middle Eastern project in Saudi Arabia has been subject to a few challenges. SANAD, Nabors’ joint venture with Saudi Aramco, has been ordered to suspend operations on three rigs due to regulatory actions, although new builds continue to progress.
“Two of those suspensions began early in the fourth quarter. Their stated duration is one year. At the same time, SANAD continues to add rigs under its newbuild program,” Petrello said. “The seventh SANAD newbuild spud in early July. Also, at the end of the third quarter, the eighth commenced operations. The ninth is on schedule to deploy later this quarter. Another five are expected in 2025 and one more should start at the beginning of 2026.”
Resilience in the U.S. market
Back at home base, Nabors reported resilient pricing, despite a slight downturn in the U.S. industry rig count, to maintain levels above $15,000 per rig. The company’s focus on high-performance and automated rigs continues to pay off, said Petrello, as it expands its automation suite across the Lower 48.
“The growth in long-lateral welds is an excellent illustration of this focus,” he said. “Recently, we have drilled a number of laterals in excess of four miles. Multiple operators across basins are extending their lateral lengths. With our advanced fleet, we are in an excellent position to enable clients to complete their increasingly challenging wells.”
During the third quarter, Nabors witnessed a slight decrease in its U.S. drilling segment revenue by $5 million, attributed primarily to declining contracts and a high churn rate.
But the company expects stability in rig counts and pricing in the Lower 48 region, projecting average daily margins to hold steady around $15,000 for the fourth quarter.
According to Evercore analysts, the company still anticipates increases in gas directed drilling and a recovery from the reductions driven by customer consolidation in 2025.
Future optimism
Looking ahead, Nabors anticipates increased activity in both U.S. and international markets. The company expects to deploy nine new rigs and maintain a total rig count of 84.
But Petrello acknowledged that the better-than-average performance from previous quarters would be challenging to replicate.
“I was surprised this quarter by how well international did,” Petrello said. “But these things tend to average out so I don’t think we’ll be as excellent as we were in the third quarter in those particular geographies, number one. And number two, we do have three rigs that are coming in, and that does create a little bit of uncertainty in terms of uptime and some of the costs that we have to incur.”
With strong cash flow generation and a disciplined approach to capital expenditures, Nabors plans to use its $80 million in free cash flow to reduce debt.
And with a pipeline of near-term rig awards in various international markets, including Asia, the Middle East and Latin America, the company expects the highs of the third quarter to continue through the end of the year.
Recommended Reading
Are Shale Producers Getting Credit for Reining in Spending Frenzy?
2024-12-06 - An unusual reduction in producer hedging found in a Haynes and Boone survey suggests banks are newly open to negotiating credit terms, a signal of market rewards for E&P thrift.
Dividends Declared Weeks of Nov. 25, Dec. 2
2024-12-06 - Here is a compilation of dividends declared from select upstream and midstream companies in fourth-quarter 2024.
Apex Locks in Financing for North Carolina Wind Farm
2024-12-05 - Apex Clean Energy said commercial operations at a 189 megawatt wind farm are expected to begin by year-end 2024.
Matador Resources Credit Facility Upped by 30% to $3.25B
2024-12-04 - Matador Resources’ 19 lenders unanimously approved a 30% increase to the E&Ps borrowing base to $3.25 billion.
SM Energy Adds Petroleum Engineer Ashwin Venkatraman to Board
2024-12-04 - SM Energy Co. has appointed Ashwin Venkatraman to its board of directors as an independent director and member of the audit committee.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.