Nabors Industries Ltd.

Good afternoon and welcome to the Neighbors Industry Second Quarter 2022 Earnings 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 and then one on your touchtone phone. To withdraw your question, please press star and 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 and Corporate Development. Please go ahead.

Good afternoon, everyone. Thank you for joining NABR's second quarter 2022 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 Navers 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 Navers.com. Instructions for the replay of this call are posted on the website as well. With us today, in addition to Tony, William, and me, are 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 adjusted 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 adjusted 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 present our results for the second quarter of 2022. We will follow our usual format I will begin with some overview comments. Then I will detail the progress we have made on our five keys to excellence and follow with a discussion of the markets. We will comment on our financial results. I will make some concluding remarks and we will open up for your questions. In the second quarter, all operating segments performed well, exceeding the expectations we laid out on last quarter. This performance reinforces our strategy. Adjusted EBITDA in the second quarter totaled $158 million, a 21% increase over the first quarter. Our operational execution remains strong across our global markets. Our average rig count for the second quarter increased by eight rigs. This rig count growth was primarily driven by increases in our U.S. and Middle East markets. Adjusted EBITDA in our drilling solution segment increased by nearly 14% sequentially. Looking at drilling solutions, Together with RIG Technologies, adjusted EBITDA from these two innovation engines totaled more than $26 million. This amount comprised over 16% of our consolidated EBITDA. In the second quarter, we made additional progress to reduce net debt. Our net debt declined to less than $2.2 billion, a $33 million improvement. Adjusted free cash flow was $57 million. This free cash flow was before strategic investments supporting the energy transition. These investments totaled $17 million in the quarter. Next, I will highlight our progress on the five keys to excellence that we believe support the investment thesis on neighbors. These include our leading performance in technology in the U.S. market, expanding and enhancing our international business, advancing technology and innovation with demonstrated results, improving our capital structure and reducing leverage, and our commitment to sustainability and the energy transition. Let me update each of these, starting with our performance in the U.S. We finished the quarter with 92 rigs running.