Nabors Industries Ltd.

Good day and welcome to the Neighbors First Quarter 2021 Earnings Conference Call. All participants will be in a 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 the star, then one. Please note that this event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Investment Relations and Corporate Development. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining Naver's first quarter 2021 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 Naver 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 Siggy 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 presentations, 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. 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 first quarter of 2021. This afternoon, I will begin with overview comments. Then I will follow with a discussion of the markets and highlights from the quarter. William will discuss our financial results. I will make some concluding remarks before opening up for your questions. Our performance in the first quarter exceeded the expectations which we laid out on our last conference call. We made further progress on our twin priorities of generating free cash flow and reducing net debt. Our free cash flow was especially noteworthy. In the first quarter, we generated $60 million. We accomplished this after funding semi-annual cash interest payments on the outstanding notes. We generated adjusted EBITDA of $108 million. All our major segments performed well, highlighting the earnings power of Naver's portfolio. We believe this accomplishment will rank favorably compared to the market. I am pleased with this start to 2021. I am looking forward to reporting further progress as the year unfolds. Now, I would like to spend a few moments on the macro environment. The quarter began with WTI in the high 40s. By early March, WTI exceeded $66. The price settled back and has been in a tight range around $60 since. Global oil supply and demand continued to rebalance in the first quarter. the EIA reports the global inventory draw of approximately 185 million barrels during the quarter. These trends in commodity prices and inventory are supportive of generally increasing oil field activity across markets. Comparing the first quarter and fourth quarter averages, the Baker Hughes lower 48 land rate count increased by 28%. According to Inverness, from the beginning of the first quarter through the end, the lower 48 rig count increased by 116, or approximately 30%. The growth rate among smaller clients outpaced the growth of the larger operators at 39% versus 13%. Among the larger clients, approximately two-thirds only modestly increased their operating rig counts, or held them flat. In comparison, with our focus on larger mid-sized companies, Our own average working rig count increased by 21%. Our total rig count increased by three rigs as we added rigs with multiple customers, while the number of rigs stacked on rate declined by six. Once again, we surveyed the largest lower 48 clients. This group accounts for approximately 40% of the working rig count. Our review of these clients shows flattish activity plan for the balance of 2021. Smaller and medium-sized operators are responding faster to the recent strength in commodity prices. In our international markets, we saw the expected demand increase in selective geographies as measured by the number of active breaks. This trend extends across major markets in Latin America and in Saudi Arabia. In summary, global oil supply and demand continues to approach equilibrium as inventories rationalize. Commodity prices seem to have stabilized at levels which generate acceptable operator economics. In response, drilling activity is increasing. Having said that, virtually every day there is a report of a major outbreak of COVID in some geography. The most recent example is India. The possibility of a resurgence of COVID remains a drag on confidence in the recovery. Overall, Assuming global economics continue to improve, the oilfield market environment is poised to support higher levels of activity. Now, I will comment on our first quarter results. Total adjusted EBITDA was $108 million in the quarter. These results reflect operating performance that was somewhat better than anticipated. With this performance, we generated approximately $60 million in free cash flow. Our global rig count for the first quarter increased by eight rigs. We saw growth across all our drilling segments. In our lower 48 business, reported daily rig margin of 8,466 was in line with our guidance. For the international segment, adjusted EBITDA for the quarter met our expectations. Daily margin at 12,917 was near the upper end of our guidance range, driven by excellent performance in the field. Once again, we had outstanding operational execution on our high-spec rig fleet. Strong operations, our leading safety performance, continued cost control, and CapEx discipline all drove the quarter's results. Next, I would like to mention some specific highlights. During the first quarter, we completed additional debt exchange transactions, Between these and our free cash flow, we logged another quarter of balance sheet improvement. Adjusted EBITDA in our drilling solution segment again increased sequentially. We saw continued growth in the penetration of our Smart Drill app. Smart Drill is Naver's proprietary rig activity sequencer that digitizes workflows and optimizes rig processes. Our installations on Naver's lower 48 rigs increased by nearly 25% versus the fourth quarter. Overall, NDS penetration of five or more services on neighbors lower 48 rigs increased versus the prior quarter. It now stands at more than 70%. A year ago, this penetration rate was 60%. As we are adding rigs, clients increasingly realize the value in NDS services. We see this reflected in NDS's results. Also in NDS, client use of our RigCloud platform for digital operations increased. In the first quarter, clients utilized RigCloud on nearly all of our working rigs in the lower 48. Our third-party installations also grew sequentially. We continue to roll out our differentiated RigCloud analytics platform. This innovative platform aggregates a wide spectrum of drilling and weld data, including KPIs and weld board placement statistics. Clients receive this information with customizable dashboards that enable real-time decision-making and drive optimal results. We successfully completed the restart of eight idle rigs in Saudi Arabia. This is notable considering the logistical and staffing challenges of starting up a large number of rigs in a compressed time frame. The local team in the kingdom collaborated closely with our customer to plan the idling process. This arrangement yielded significant cost benefits while the rigs were idle and as they were restarted. We recently published our updated ESG report for 2020. I think you will be impressed with our progress in this area. On a related note, we now have two rigs running advanced battery-based hybrid energy management solutions in the Lower 48. We believe Navers has the first successful installation on a natural gas-fueled rig in the industry. This system has yielded significant fuel savings as well as an improved emissions profile. A third lower 48 system is expected to deploy in the near future. We are in early discussions with multiple operators for systems in our international markets as well. In addition to these highlights, I would like to discuss RIG Cloud analytics in more detail. As a reminder, the RIG Cloud value chain combines our edge, analytics, and digital workflow capabilities. These create a unique and compelling value proposition during the well construction process. RIG Cloud Analytics is powered by high-end edge computing at the RIG site. This infrastructure enables us to deliver real-time analytics that drive database decisions across multiple wells and RIGs. In addition, RIG Cloud Analytics offers key differentiators for NDS's digital and automated solutions, such as our Smart Suite. With RIG Cloud Analytics, clients can explicitly determine the value generated by our apps and drilling services. In turn, these features should support a faster pace of technology adoption and mutually beneficial performance-based contracts. The initial focus of our RIG Cloud Analytics is the prediction of future outcomes, answering the questions, what is likely to happen and when. Our roadmap should lead us beyond this functionality and ultimately facilitate true automation of the drilling process. I will also make some comments on the energy transition and our initiatives to position neighbors as a leader as our industry evolves. I mentioned earlier increased deployments of the power management system for rigs. We are also examining several alternatives to improve neighbors' own carbon footprint, including technologies aimed at carbon capture, emissions minimization, and power management. We look forward to leveraging our expertise, global footprint, and proven record of innovation to develop and deploy impactful clean energy solutions. We expect to make tangible progress in the near future, and I'm excited with the potential of these strategic initiatives. Before turning the call over to William, I will discuss our view of the market in more detail. The lower 48 industry has hit at 197 rigs, or 87%, since its low in August. Based on the commodity price backdrop and our conversations with clients, we expect neighborage rate count to increase each quarter through the balance of 2021. Along with this activity outlook and the resulting increases in utilization, we see pricing traction in the second half of the year. In our international markets, we continue to see steady increases in activity across our major markets. There are two specific developments which I would like to draw your attention to. First, The Standard Joy Venture in Saudi Arabia has now received four awards for new buildings from Saudi Aramco. We expect the first of these to deploy in early 2022. These new deployments are the first step to scale the operation to a new level, backed by the support of our key customer. We are excited at the beginning of this phase of the relationship with our partner and the future growth opportunity it presents. In Latin America, we are seeing the customer base broaden in both Argentina and Colombia. We have rigs working for three customers in Colombia and five in Argentina, where we hold 38% of the market. We think this diversification is healthy for neighbors. It indicates the wide appeal of our value proposition across the customer base. Now, let me turn the call over to William, who will discuss our financial results and guidance.