Nabors Industries Ltd.

Good day, and welcome to the Neighbors Fourth Quarter 2024 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 star, then one on a touch-tone phone. And to withdraw your question, please press star and then two. Please note that 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 morning, everyone. Thank you for joining Naver's fourth 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 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. 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 prospectus. Nabors 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 Nabors 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 transaction. With that, I will turn the call over to Tony to begin.

Good morning. Thank you for joining us today as we review our fourth quarter results. We will also comment on our prospects for 2025. Let me start with our performance. Free cash flow this quarter fell short. Like others in the sector, we had a very substantial receivable in Mexico, outstanding at year-end. And the pace of new-build delivery milestone payments in Saudi accelerated more than planned. William will provide further color on these in his remarks. Adjusted EBITDA in the fourth quarter totaled $221 million. The lower 48 market has remained at the levels of the prior quarters. This is disappointing since the market has not improved as we anticipated. That performance directly impacts two of our businesses, our own filling rigs in the lower 48 and NDS, both on neighbors' rigs and on third-party rigs. At the same time, margins in these two businesses remain solid. Pricing in the lower 48 drilling market continues to reflect the significant value that our rigs and NDS's portfolio generate. I will start my detailed remarks with the international markets. For neighbors, international markets have remained stable over the past few years. More recently, we have entered a period of robust growth. Our earlier rig awards are now progressing into deployments. In 2024, we activated a total of 10 international rigs. For 2025, we previously announced nine startups. In addition, we expect to reactivate a recently idled rig in Columbia. So, another 10 deployments this year. On top of this total, we have a strong pipeline of additional tenders. These opportunities are in markets which meet our financial thresholds. They are also in key geographies for oil and gas production. We are optimistic for incremental rig awards this year, which would deploy in 2026. Turning to the U.S. market, the weekly industry rig count masks an elevated level of rig churn. Even so, leading-edge pricing for high-performance rigs remained relatively stable. Daily rig margins in the fourth quarter remained at attractive levels in line with our guidance. Our global average rig count declined slightly compared to the previous quarter. This decrease was almost entirely due to a reduction in our lower 48 rig count. Our technology-focused businesses, NDS and RigTech, generated a combined EBITDA of more than $43 million. Together, their total EBITDA grew from the previous quarter. A key element of our strategy is to grow the contribution from these CapEx Lite segments. In the fourth quarter, their contribution increased to 19.5% of the company's consolidated EBITDA. Now I will make some comments on the key drivers of our results. I will start with our international drilling business. Across multiple international markets, we see a large number of opportunities and tenders for additional rates. This favorable backdrop offers the prospect to redeploy several currently idle rates. At the same time, the broad market strength enables us to focus on prospects that recognize the value that neighbors can deliver. Now, I'll summarize the recent developments in our international drilling business. In the fourth quarter, we deployed two rigs in Argentina. These are part of the three rigs awarded last year. We are utilizing idle rigs in the U.S. to meet this demand for unconventional development in Argentina. We are also providing a significant amount of NDS content on these rigs. In Kuwait, we expect the first of the three previously announced rigs to deploy later in the first quarter. The second and third rigs are scheduled to commence operations in the second quarter. We see a considerable number of opportunities for additional rates. They are spread across geographies including Asia, MENA, and Latin America. Operators in these markets are collectively seeking more than 50 rates. This number of additional opportunities supports our own rate count progression and pricing improvements in the international markets. We will maintain a disciplined approach to these opportunities to ensure we meet our 2025 free cash flow target. In Saudi Arabia, SANA deployed its ninth new bill during the fourth quarter. Another five are scheduled for 2025, with two of those in the first quarter. And one more should start at the beginning of 2026. That will bring the total working to 15. On top of these 15 deployments, SANA expects to receive awards this year for another five new bills. Upon award, construction on all five of these rigs will commence. I would like to make a few more comments on SANA. Specifically, I'll address the new built rig program. This program, as you know, calls for 50 rigs built in the kingdom over a 10-year period. Senate only places orders for rigs from the manufacturer when Senate receives an award from the operator, Saudi Aramco. The rigs work under six-year initial term contracts. That contract is structured to ensure a return on invested capital in five years. When the initial contract finishes, It is normally followed by a four-year renewal. That's at least 10 years of firm utilization. Sanit is now entering the fourth year of the program. As the operator, Aramco continues to push ahead toward the total of 50. As these rigs are deployed, each rig contributes significant EBITDA to Sanit. The early units generate more than $10 million per year. We expect the more recent ones to produce approximately $13 million annually. This increase primarily reflects some cost inflation as well as rig mix. Even with that, Standard still recoups its investment within five years. Let me break down the status of the program. Standard began 2025 with nine new bills working. Six more are currently under construction. Five of these six should start in 2025 with two scheduled for the current quarter. Altogether, we forecast the working new-build fleet will generate adjusted EBITDA of more than $140 million in 2025. With another five expected to start in 2026, SANA is looking at earning approximately $200 million in EBITDA in 2026 just from the new builds. The program reflects Saudi Arabia's strategic decision to build a sizable drilling rig fleet in the Kingdom. We are proud to be part of this effort. Our partner and client is the largest player in the global energy industry. It is known for prudent, long-term investments. In Santa's case, together, we are building one of the preeminent drilling rig companies in the Middle East. We are not aware of another opportunity in the industry approaching the scale and certainty of the set of new builds. By our estimates, the returns on this fleet are greater and lower risk than most other investments in the drilling rig business. While recognizing the capital requirement is significant, we see a path to free cash flow in the 2027-28 timeframe. That should lead to distributions to the partners. Longer term, we aim to capture the significant valuation afforded to drilling contractors in the Middle East. We are confident that would generate significant value for our shareholders. And it is important to note that this growth is built on top of a very healthy legacy business, which continues to generate a strong positive free cash flow. Now I'll discuss our performance in the U.S. Our daily rig margins in the lower 48 rig fleet remained at high levels in the fourth quarter. Strong demand for high-performance rigs continues to support attractive pricing. While there is an active turn in the marketplace and resulting friction on daily margins, pricing remains generally disciplined. Select operators are looking to longer lateral weld designs in order to extract more value from their assets. Given our rig capabilities, several clients already use neighbors to drill their longest welds. The trend toward increasing lateral lengths continues. Our lower 48 operation is well positioned to capitalize on this trend now and even more so once we close the Parker acquisition. In this environment, even at current fleet utilization, our operation generates significant free cash flow. All of our comments on our lower 48 drilling results reflect only the rigs themselves. In addition to the margin on our rigs, NDS generates significant margin on its own. I'll elaborate on this in a moment. Next, let me discuss our technology and innovation. In the fourth quarter, NDS once again made an important contribution to our overall results. NDS's gross margin exceeded 54% in the quarter. This performance is a record. It demonstrates the benefits of the NDS portfolio to clients. In the lower 48 market, the average daily margin from our drilling and drilling solutions businesses combined was approximately $18,700 in line with the third quarter. Of that, NDS contributed $3,723 per day. This measure, NDS lower 48 daily margin, increased by more than $100 per day. These NDS results validate our strategy. Next, let me make some comments on our capital structure. While our top priority remains the reduction of our debt, our fourth quarter was challenged by three main factors. First, in Mexico, significant delays in payments from our customer of approximately $50 million. We are working diligently to rectify the situation. We expect the customer to resume payments during the first half of 2025. Second, a lack of growth in the lower 48 market. And third, in Saudi Arabia, the pace of payments for new bills accelerated. This was due to faster milestone completion by the rig manufacturer. The ongoing investment in Saudi Arabia is significant. The U.S. market remains sluggish. We will respond to this environment with actions to improve efficiency and align our cost structure. At the end of the fourth quarter, we surveyed the largest lower 48 industry clients. After a number of EMP mergers, our survey now covers 15 operators. These clients account for approximately 46% of the lower 48 industries working rigs at the end of the quarter. The latest survey indicates this group intends to reduce its rig count 4% by the end of 2025. This expected decline is concentrated among three operators. Reasons for the decline include improved performance and concerns about the market environment. Outside of these three operators, The indication is to add a modest number of rigs. Consistent with my earlier comments, our view for the international market remains bullish. Our deployment plan includes four rigs in the first quarter of 2025. With these additions, we expect to end the quarter with 89 international rigs working. For the full year 2025, including the four I just mentioned, we have 10 total rigs scheduled to deploy, five new build rigs in Saudi Arabia, three activations in Kuwait, one activation in Argentina, and one activation in Colombia. Early in the fourth quarter, we announced the agreement to acquire Parker Wellbore. Shareholders of both companies have approved the merger. While the entry trust review period in the U.S. has passed, approvals in a few countries are pending. The teams have completed a substantial amount of integration planning. We are confident we will realize an annualized cost synergies of at least $35 million in 2025. We are looking forward to adding Parker to the neighbor's portfolio and to realizing significant strategic and financial benefits. Now, let me turn the call over to William, who will discuss our financial results.