Nabors Industries Ltd.

Good day and welcome to the third quarter 2024 neighbors industries earnings conference call all participants will be in listen only mode, should you need assistance, please signal 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 to please note this event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Corporate Development and Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining Naver's third quarter 2024 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 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 in 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. The presentation accompanying today's discussion includes important disclosures that apply to this call. Please also note this call does not constitute an offer to sell or buy or the solicitation of any offer to buy or sell any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities law of any such jurisdiction. No offering of securities shall be made except by means of prospectus meeting the requirements of Section 10 of the Securities Act of 1933. In connection with the proposed transaction, Nabors and Parker intend to file a registration statement on Form S-4 with the SEC, which will include a joint proxy statement and a prospectus. Neighbors and Parker will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decisions, investors and security holders of Neighbors and Parker are urged to carefully read the entire registration statement and joint proxy statement and prospectus when they become available, as well as any amendments or supplements to these documents because they will contain important information about the proposed transactions. With that, I will turn the call over to Tony to begin.

Good morning. Thank you for joining us today. Before I comment on neighbors' results and the outlook, I would like to make a few comments about the acquisition of Parker Wellbore. I have stated that we are excited about the combination of our companies. Parker's portfolio of businesses and geographic footprint fit neatly into neighbors. We believe the acquisition accelerates our strategy, particularly in our drilling solutions segment. We see excellent growth prospects at Parker, especially for Quail Tools. And in economic terms, we think this deal will benefit all neighbors' shareholders, including Parker's current owners, as the market recognizes the transaction's value and merits. Now, I will discuss our results and outlook. Adjusted EBITDA in the third quarter totaled $222 million. This was in line with our expectations. Margin in our international segment exceeded the $17,000 mark. Daily margins in the U.S. lower 48 remained above the $15,000 mark. Adjusted EBITDA in our drilling solution segment increased sequentially by 5.7%. This performance was driven primarily by growth in our international business and a positive mix shift in the U.S. I will begin my detailed remarks with comments on the international markets. For neighbors, the international markets remain a source of strong growth. Our prior rig awards are progressing into deployments and incremental EBITDA. I note that we have three more international rigs expected to start by the end of 2024. We also have a considerable number of pending deployments in 2025 and beyond, which I will detail shortly. And the prospect for additional tenders and awards is robust. This provides the opportunity for us to be selective. We will only pursue the most attractive incremental projects. Turning to the U.S. market, I am pleased with our resilience in pricing and rig count. End to end, lower 48 industry activity increased by six rigs over the course of the third quarter. The average lower 48 industry rig count decreased by approximately 3% sequentially. In this lower 48 industry environment, leading-edge pricing for high-performance rigs remains stable. This market supports our daily rig margins at historically attractive levels. Our global average rig count was essentially in line with the previous quarter at 159. Our average international rig count increased slightly while the U.S. rig count declined modestly. Neighbors Drilling Solutions and Rig Technologies segments generated combined EBITDA of more than $40 million. Together, their total EBITDA increased from the previous quarter. As you may know, increasing the proportion of the CapEx light segments is an important component of our strategy. In fact, as a portion of the company's consolidated EBITDA, their contribution increased to 18.3%. Next, I will make some comments on the five key drivers of our results. I'll start with our international drilling business. The international drilling market continues to show broad strength. We see this across most of our important geographies and in some where we are not currently active. We are encouraged by the substantial number of pending opportunities for additional rigs. In this market, we will choose carefully, pursuing only the most attractive prospects, namely those that enable us to generate high returns and meet our free cash flow objectives. Next, I'll recap the developments in our international business. In the third quarter, we deployed the last of our four-rig award in Algeria. These deployments were accomplished in a capital efficient manner by reactivating four of our idle rigs in the country. We have another four idle rigs in Algeria. We are optimistic to activate a number of those in the near term. During the fourth quarter, We also expect to commence operations with two of the three previous rig awards in Argentina. Similar to Algeria, we are putting idle rigs to work. In the case of Argentina, the rigs are coming from the U.S. The third rig should start in early 2025. In addition, we expect substantial drilling solutions content on all of the rigs. In Kuwait, we have started upgrading the rigs for the three awards we announced earlier. Each of those rigs is currently in country. All three are on a schedule to deploy in early 2025. In Saudi Arabia, we have a number of items to update. First, I am sure you have seen reports of rig suspensions in the kingdom. That is, our joint venture with Saudi Aramco has received notice to suspend operation of three rigs out of 51. Two of those suspensions began early in the fourth quarter. Their stated duration is one year. At the same time, SANA continues to add rigs under its new build program. I previously mentioned the seventh SANA new build 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. Next, I'll discuss our performance in the U.S. Daily rig margins in our lower 48 fleet remained robust. above the $15,000 mark. This performance reflects the resilient market for our high-performance rigs and the value they generate. Our focus remains on the portion of the market that demands performance and, increasingly, automation. The growth in long lateral welds is an excellent illustration of this focus. Recently, we have drilled a number of laterals in excess of four miles. Multiple operators across basins are extending their lateral length. With our advanced fleet, we are in an excellent position to enable clients to complete their increasingly challenging wells. Our approach to pricing continues to be resolutely disciplined. That combination is yielding attractive financial results and generating significant free cash flow. My earlier comments and our reporting on lower 48 daily rig economics do not include any contribution from NDS. In addition to our rig margin, NDS generates significant margin on its own. I'll discuss this in more detail in a moment. Next, let me discuss our technology and innovation. In the third quarter, NDS international revenue and EBITDA were each up sequentially. NDS international margin expanded, and EBITDA grew by more than 10%. Our results in these markets are validating our strategy. Driven by the international performance, overall, NDS EBITDA met our expectations. Now I'll discuss the lower 48 market specifically. The average daily margin from our drilling and drilling solutions businesses combined was 18,700 in the third quarter. Of that, NDS contributed $3,618 per day. This measure, NDS lower 48 daily margin, increased sequentially. During the quarter, we saw a shift in the mix of our NDS services as well as increased penetration on neighbors' rigs in the lower 48. Higher installations of our performance software and our automation suite in particular drove this growth. We saw expansion in the following automation systems, Smart Slide Directional Control, Smart Nav Directional Guidance, and Smart Drill Drilling Process Automation. During the quarter, we also saw third-party growth in NDS smart ROS rig operating systems and rocket drill pipe oscillation software. Our results for the third quarter validate our strategies. We are expanding our international drilling rig presence and increasing the penetration of our automation software across our markets. Next, let me make some comments on our capital structure. During the quarter, We continue to work on our debt maturity profile through the issuance of seven-year notes. As of now, the weighted average maturity of our notes stands at approximately four and a half years. Neighbors has delivered over $80 million of free cash flow through three quarters, net of $128 million of CapEx, supporting the Santa New Bill program. Heading into our strongest quarter of the year in terms of cash generation, we expect to retire debt with our free cash. I'll finish this part of the discussion with remarks on sustainability. Our energy transition portfolio focuses on improving operational performance and reducing emissions. Once again, in the third quarter, these solutions contributed to the results of our rig technology segment. The PowerTap module, which connects rigs to the grid, remains the largest contributor to our ET business. The first PowerTap unit in Argentina is slated to begin work in the next couple of weeks. Operators in several other international markets have expressed interest in units. We are optimistic that interest will translate into sales. Next, I will discuss the rigged pricing environment. Our third quarter results in the lower 48 once again showed resiliency and leading edge market pricing. We remain disciplined in our approach. As well, our competitors continue to recognize the imprudence of chasing market share with discounting in a flat market. In the international market, we have visibility to additional near-term rig awards. They are spread across geographies, including Asia, MENA, and Latin America. These markets are seeking as many as 40 rigs. The opportunities are located in countries where we work currently or that we consider attractive. Pricing in the international markets continues to have an upward trend. We surveyed the largest lower 48 clients at the end of the third quarter. Our survey covered 15 operators comprising approximately 46% of the lower 48 industries working rigs at the end of the quarter. The latest survey indicates this group's year-end 2024 rig count will be somewhat lower than the total at the end of the third quarter. The expected decline results from a combination of merger-related consolidation and the wind down of certain drilling programs. Our survey is skewed toward the larger operators. including those that have participated in the recent industry consolidation. For the international market, our view remains bullish. We are on track to add three rigs in the fourth quarter of 2024. With these additions and factoring in the suspensions in Saudi Arabia, we expect to end the year with 85 international rigs working. As we look to 2025, we have nine rig awards that are scheduled to deploy during the year. Five new bills in Saudi Arabia, one activation in Argentina, and three activations in Kuwait. In addition to the nine I just mentioned, we have identified a significant number of incremental opportunities, so stay tuned. Next, I will share a couple of highlights from the quarter, in addition to those we announced in the press release. The common thread in all of our highlights is the strong element of our advanced technology solutions. An operator in the Uinta Basin drilled what it believes is a record three-mile lateral in that basin. This was accomplished on a third-party rake. It ran NDS's Smart Cruise Auto Driller, Revit's Thick Slip Mitigation, and Smart Drill Process Automation. This well is a notable example of NDS's opportunity to drive value for our customers. Another operator drilled the three fastest wells in the Powder River Basin. Using NDS's Smart Drill on a third-party rake, this project illustrates the repeatability of the NDS value creation. It further demonstrates NDS's success targeting the third-party rig market. Now, let me turn the call over to William, who will discuss our financial results.