Nabors Industries Ltd.

Good afternoon and welcome to the Neighbors Third Quarter 2020 Earnings Release Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone. Thank you for joining Naver's third quarter 2020 earnings conference call. Today, we will follow our customary format with Tony Petrello, our Chairman, President, and Chief Executive Officer, and William Restrepo, our Chief Financial Officer, providing their perspectives on the quarter's results along with insights into our markets and how we expect neighbors to perform in these markets. In support of these remarks, a slide deck is available, both as a download within the webcast and in the investor relations section of neighbors.com. Instructions for the replay of this call are posted on the website as well. With us today, in addition to Tony, William, and myself, are City Meissner, President of our Global Drilling Organization, and other members of the Senior Management Team. Since much of our commentary today will include our forward expectations, they may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties, as disclosed by neighbors from time to time in our filings with the Securities and Exchange Commission. As a result of these factors, our actual results may vary materially from those indicated or implied by such forward-looking statements. Also, during the call, we may discuss certain non-GAAP financial measures, such as net debt, adjusted operating income, adjusted EBITDA, and free cash flow. All references to EBITDA made by either Tony or William during their presentation whether qualified by the word adjusted or otherwise mean adjusted EBITDA as that term is defined on our website and in our earnings release. Likewise, unless the context clearly indicates otherwise, references to cash flow mean free cash flow as that non-GAAP measure is defined in our earnings release. We have posted to the investor relations section of our website A reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures. As you are aware, Neighbors currently has a capital markets transaction underway. Accordingly, while we welcome your questions regarding our results, outlook, and view of the markets, we will not field any inquiries regarding this transaction. With that, I will turn the call over to Tony to begin.

Good afternoon. Thank you for joining us as we review our results for the third quarter of 2020. I will begin with comments on our actions in light of the current environment. Then I will follow with the discussion of the markets and highlights from the quarter. William will follow with the financial results. My wrap-up comments today will focus on the evolution of the market for advanced technology and our leadership position driving this progress. I would like to start by recognizing the neighbor staff for their efforts and performance. The twin challenges of the pandemic and the industry environment are unprecedented. Our team has excelled in maintaining the continuity of our global operations while improving our industry-leading safety record. The health and safety of our employees is paramount. We continue to make progress toward mission zero with the ultimate goal of zero hertz. On the financial front, our third quarter results illustrate the full impact of the expense reductions implemented earlier this year. I am pleased with the progress to date. I am also challenging the team to optimize our business processes and to add focus on cost avoidance. Our outlook on capital spending has also improved and we are now targeting approximately $200 million for the full year 2020. This amount is $40 million lower than our previous target and substantially below last year's spending of $424 million. Our immediate financial priorities remain free cash flow generation and net debt reduction. As a result of our persistent efforts, we continue to make material progress on these goals. Now, I will spend a few moments discussing the macro environment. During the third quarter, near month WTI traded in a relatively narrow band around $40. This lower volatility is a market change from the extremes we saw in the first half. Also in the third quarter, global oil consumption increased by almost 11% versus the second quarter. That restoration of demand has contributed to increased operator confidence. Against this backdrop, we have also seen additional consolidation activity. Comparing the third quarter average to the second quarter, the Baker Hughes lower 48 land rig count declined by 37%. The rig count appears to have bottomed in August at 226 rigs. Since then, activity has increased. The Baker count recently stood at 278, a gain of 23% from the bottom. This increase in the industry rig count has mainly resulted from activity increases among second and third tier clients. The 20 largest operators, as we characterize them, have been mixed. Some have added rigs, others have released units. In the aggregate, this group is essentially flat. In this environment, our relative market share performance against competitors has been notable. Based on quarterly average read counts, we gained three points of share in the third quarter. In our international markets, the current activity tempo varies by country. In Argentina and Colombia, the active read count has increased. You will recall that in both of those markets, the response to the coronavirus in the spring was a total shutdown of drilling. In our major markets in the Eastern Hemisphere, customer reactions were initially muted. Subsequently, several of these customers implemented deeper cuts. Our largest international market, Saudi Arabia, experienced an expected decline. We believe activity there will begin to increase at the beginning of next year. To summarize our view of the markets, global oil demand continues to grow. Oil inventories which built substantially earlier this year are being liquidated. These factors and the resultant stability in commodity prices appear to have improved operator confidence in the future outlook. The customer base has begun to respond with activity increases. The recent resurgence in COVID and its effect on oil prices could temper these positive developments. At this point, the impact is difficult to predict. I will now highlight a few aspects of our third quarter results. Total adjusted EBITDA was $114 million in the quarter. These results reflect activity which was largely in line with our expectations. Our financial performance, specifically in our lower 48 operation and international segment, exceeded our expectations. With this EBITDA performance and after funding interest payments on our notes, We've reduced net debt in the quarter by approximately $6 million. Our global rig count for the third quarter totals 132 rigs and 11% decline from the second quarter. This scale and our geographic diversification continued to generate value and enabled us to make progress on our strategic imperative to reduce net debt. In our lower 48 business, our reported daily rig margin of $9,527 once again exceeded expectations that we laid out on the previous earnings call. In light of this performance, I would like to reiterate the driving factors. First, in the lower 48, our rig capabilities are the industry's highest. In this market environment, these capabilities enable our clients to pursue their programs as efficiently as possible. Second, we remain the industry frontrunner in both operational and safety performance. This combination is a real differentiator for neighbors. Third, our relentless focus on reducing expenses across the enterprise continues to reinforce our margins. And fourth, our pricing has been supported by our industry leading value proposition enabling us to mitigate the erosion in the market. We achieved some notable highlights in addition to our financial results. We introduced our RigCloud platform for digital operations in the second quarter. Since then, we have migrated 65% of our legacy user base over to RigCloud. Our offering currently includes more than 25 analytic apps with more to come. RigCloud recently took first place in a digital app development challenge organized by a super major. RigCloud beat the group of competing drilling contractors and technology companies. This type of head-to-head win bolsters our position as the digital leader in the drilling space. In the U.S., we added installations of both Smart Slide, our directional steering system, and Smart Drill, our drilling process automation system. We also grew our well count for both Smart Slide and Smart Nav, our directional guidance platform. In fact, our well count in the third quarter for both Smart Slide and Smart Nav increased over the respective second quarter levels. In the third quarter, SmartNav and SmartSlide were installed on 44% of our lower 48 rigs. In other words, that 44% of our rigs are running wellbore placement, either fully remote or with reduced directional drilling crews. That is a 15-point increase in penetration versus the second quarter. For SmartDrill, our penetration increased to 90% of neighbors' rigs, up from 6% a quarter earlier. I think this sequential growth Illustrates the market's rapid acceptance of our smart apps. We run Smart ROS, our advanced rig operating system, on our entire lower 48 AC rig fleet. We are now actively marketing to third-party rig contractors and have a multi-rig installation with one customer in the lower 48. We remain focused on ESG, and our goal is to improve our standing. This quarter, we improved our ISS social score significantly. We also improved our environmental score by one notch. This progress demonstrates our commitment to ESG and we look forward to reporting additional progress in the future. I will now discuss our view of the market in more detail. Last week, the lower 48 land rig count stood at 278. That is up by 11% since the end of the second quarter. Neighbors working rig count over the same timeframe is up 14%. Comparing quarterly averages, Naver's third quarter working rig count, excluding rigs stacked on rate, declined by 20% versus the second quarter. We fared much better than the industry, which dropped by 37%. The lower 48 industry has added 52 rigs, or 23%, since its low in August. Looking forward, we see evidence of the recent stability in oil prices leading to an improvement in operator confidence. We have visibility to adding rigs over the next several weeks. We are in discussions for several more through the end of the year. In our international markets, we have already seen our activity increase gradually in Argentina and Colombia. We believe we have line of sight to rig restarts in Saudi Arabia. As market activity rebounds, we believe that clients will prefer contractors with established share and records of operational excellence. I am convinced neighbors will prevail in this environment. That concludes my remarks on our third quarter results, highlights on the market. Before William offers his remarks, I would like to recognize the neighbors team for their perseverance in this challenging environment. On behalf of the company, I would also offer our concern and best wishes to all of those who continue to be impacted by the virus. Now, I will turn the call over to William for his discussion of the financial results and guidance.