Nabors Industries Ltd.

Good day and welcome to the first quarter 2025 Neighbors Industries Limited 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 join the question queue, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

Please note that the 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 first quarter 2025 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's to perform in these markets. In support of these remarks, the 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. With that, I will turn the call over to Tony to begin.

Good morning. Thank you for joining us today as we review our first quarter results. We will also comment on our acquisition of Parker Well Board and on the current market environment. Let me start with a few remarks on the Parker acquisition. We completed the transaction on March 11. Thus far, the Parker operations have performed in line with our expectations. Our efforts to realize synergies are progressing. We are on track to achieve our $40 million target for 2025. The integration is proceeding with the appropriate importance and speed. Next, let me address the macro environment. Several factors currently weigh on the oil market. In particular, plans announced by OPEC Plus to gradually unwind prior output reductions, the potential impact of higher tariffs on the global economy, and relatively high production from U.S. shale facilitated by continued efficiency gains. On the positive side, Natural gas activity in the U.S. appears poised for some recovery over the upcoming quarters. We have already added a few rigs in gas-focused basins. We are prepared to bring multiple rigs back in the event of an acceleration in natural gas activity. Our results for the quarter include neighbors' legacy business, plus the contribution of 20 days from Parker post-closing. The international drilling business performed well, especially our sanitary venture in Saudi Arabia. We received a partial payment on our receivable in Mexico. Nonetheless, we continue to be extremely focused on this issue and expect further progress in the second quarter. Free cash flow in the quarter benefited from lower than expected CapEx on the set of new bills, offsetting the normal heavy seasonal payments at the beginning of the year. In the U.S. lower 48, although our revenue per day held up well, our daily margin fell short. During the quarter, we experienced relatively high level of churn that caused inefficiencies and increased our operational expenses. The activity churn also affected our NDS business. Total adjusted EBITDA in the first quarter was $206 million. The lower 48 market average quarterly rig count essentially remained at the levels of the prior quarters. Our own rig count varied through the quarter. We entered the quarter at 64 rigs. For a brief time, our count touched 58. We finished the quarter at 62. Now it stands at 63. Next, I'll discuss the international markets. In Russia, the recent expansion of U.S. sanctions led us to suspend operations there. At this point, we do not expect to restart our activities in that market. In addition, the financial performance of the three rates have become increasingly marginal. Continuing to support the business was becoming challenging. In other markets, we reached the end of our contracts on two rigs, in Papua New Guinea and the UAE. We started up the 10th new build in Saudi Arabia on its initial six-year term contract. We also reactivated a rig in Colombia. However, we received notices to release two rigs by the end of the second quarter. We are working on recontracting both of these rigs. Over the remaining three quarters of 2025, we expect to add 10 rigs. In April, we have already deployed two of those, another new build in Saudi Arabia and one of the rigs in Kuwait. Notwithstanding worldwide rig count volatility, current tendering activity continues in several countries across the Middle East and in Latin America. We are focused on opportunities in key geographies that meet our financial thresholds while minimizing our capital requirements. Now, let me comment on the U.S. market. The Baker Hughes weekly lower 48 rig count was remarkably stable during the quarter. We have noted a shift in this market. Smaller operators have added rigs, while larger ones have reduced their activity. This aggregate performance, notwithstanding, during the quarter, affected downward pressure on our own rig count. Daily margin for our lower 48 rigs was 14,276 per day. Our expenses in this market increased in the first quarter, driven by the inefficiencies I mentioned earlier. We are focused on reducing these costs and aligning with the current environment. Our drilling solutions and rig technologies businesses combined generated EBITDA of more than 46 million. Together, their growth in the previous quarter was due to the addition of Parker. The Parker operations make an immediate impact on our strategy to grow the contribution from our NDS business. Now I will make some comments on the key drivers of our results. I'll start with our international drilling business. The international markets continue to provide opportunities to deploy additional rigs. Several markets appear to be growing and increasingly require our advanced technology. Even in this environment, we see prospects to reactivate a number of currently idle rigs. Next, I'll summarize the developments in our international drilling business. In the first quarter, we reactivated a recently auto rig in Columbia. We were able to rapidly place the rig with a different client, further diversifying our customer base there. We are working to place the two recently auto rigs as well. In Kuwait, the first rig of the previously announced award spud earlier this month. The second and third rigs are scheduled to commence operations in the second quarter. Kuwait is an important market for our high performance drilling capabilities. We expect the rigs to materially contribute to our earnings and cash flow over the life of the contracts. Across international markets, we see a number of opportunities. Most of them are concentrated in the eastern hemisphere, and a limited number are in Latin America. When evaluating tenders, our paramount concerns are cash payout and capital expenditures. We believe that any incremental demand in those markets should help support pricing. In Saudi Arabia, our Sanad Drilling joint venture started up its 10th new build during the first quarter. Number 11 started early in the second quarter. Three more are scheduled for 2025. Another one is slated to start early 2026. That will bring the total number of working new builds to 15, in addition to the 40 legacy rigs currently active. On top of these 15 deployments, Sanad and its customer are in discussions on the next five new builds. We expect this process to be concluded over the next couple of quarters. Construction would start after the rigs are awarded. In Saudi Arabia, a number of land rigs have been suspended over the past year. Approximately three-quarters of those rigs were supporting conventional oil development. Over the same time period, in addition to the five Senate new bills, a number of rigs have been added in the unconventional natural gas market. I would note that approximately 75% of SaNED's fleet works in natural gas. Virtually all of our fleet is capable of operating in the more demanding gas spaces. Before I move to our U.S. business, I would like to make some additional comments on SaNED. In March, we published materials illustrating the value potential for SaNED. This year, SaNED forecasts it will earn a adjusted EBITDA of over $300 million. At this level, the business already has scale. On top of that, we project the new build additions at a cadence of five per year will drive annual adjusted EBITDA successfully higher. This combination of material scale and strong embedded growth, along with attractive valuations in the region, comprise the formula for significant potential value creation over the next few years. Our goal is to realize our share of that value with substantial benefits to neighbor shareholders. Now I'll discuss our performance in the U.S. Daily rig margins in our lower 48 rig fleet declined more than expected, driven by increased costs. In this market, we continue to experience elevated levels of volatility as our customer mix shifted. This created challenges for our operating efficiencies and margins. The current rig pricing environment has, to date, remained relatively disciplined. It is true, however, that we have seen a slight downward trend in leading edge pricing. We believe this will have some impact on our average margins over the next few quarters. Industry utilization for high spec rigs has been in a narrow range for some time. About two thirds of the industry's high spec rigs in the lower 48 are currently working. At these levels, there is some pressure on day rates. We are working to mitigate this pressure taking out costs where possible, and ensuring the field support structure is appropriate for the working fleet. Next, let me discuss our technology and innovation. In the first quarter, our drilling solutions business did experience some leakage from the churn in the U.S. However, drilling solutions remained a significant contributor to consolidated results. NDS's quarterly performance also benefited from the addition of Parker's operations after the acquisition closed in March. The segment's combined gross profit margin was approximately 53%. In the first quarter, NDS's revenue from international markets, excluding the impact of Parker business, comprised almost half of the segment's revenue. NDS is clearly benefiting from its geographic diversity as the international growth continues to compensate for sluggishness in the U.S. Next, let me make some comments on our capital structure. Our highest priority remains the reduction of our debt. Early in the second quarter, we took advantage of the market and repurchased 11.4 million phased value of notes at a significant discount. We expect to generate free cash in 2025 to reduce debt, despite material cash consumption incentive. Next, I will discuss the global unit outlook, starting with our quarterly survey. At the end of the first quarter, we collected the activity plans for the largest lower 48 industry clients. Our survey covers 14 operators. These clients account for approximately 43% of the lower 48 industry's working rate count at the end of the quarter. From the latest survey, this group expects to reduce its rate count by approximately 4% from the end of the first quarter through the end of 2025. This decline is spread across slightly more than half of the operators. With this outlook, a segment of mainly large public operators is now indicating a total reduction of 7% from the beginning of 2025 through the end of the year. Over the last couple of months, we have seen the impact of these customer plans, but we have managed to replace this drop in activity with a number of contracts. We expect this trend to continue. In the international markets, to date, the environment remains positive, including the rigs recently deployed in Kuwait and Saudi Arabia, We have 10 rigs expected to commence work during the remaining three quarters of 2025. Six of those rigs are in the second quarter. We should end the quarter with 87 international rigs working compared to 85 at the end of 2024. After that, in the second half of the year, we have four more rigs scheduled to deploy. Two new builds in Saudi Arabia, one in Argentina, and one in India. Before turning the call over to William, I'll wrap up with a few remarks on Parker. As I mentioned, we have already made considerable progress toward our goal of achieving $40 million in cost synergies during 2025. I want to recognize the outstanding efforts of both teams to make this happen. Their collaboration and dedication fuel my confidence in reaching our target. Now, let me turn the call over to William, who will discuss our financial results.

Thank you, Tony. Good morning, everyone, and thank you for joining us today. I would like to make an initial comment on the Parker Global Acquisitions, which closed on March 11th. Our first quarter financial statements included 20 days for the acquired business. The Parker numbers are reflected across our segments. The financial results I will provide include the Parker contribution, but I will also provide details on the acquired business. During the first quarter, we experienced significant disarray in the equity and debt markets, and we expect more of the same in the second quarter as the current administration continues with this new approach to foreign trade. Given the current financial market volatility, I will provide some comments on the current state of the drilling market. Up to now, we have not seen reductions in drilling activity in the U.S. nor in our international markets as a result of the tariff uncertainty. We are experiencing decreased activity in certain international markets, but we believe these reductions, which started last year, are unrelated to the current recession fears. In Saudi Arabia, we continue to see an acceleration in the shift from oil to gas drilling, and in Mexico, our customers continue to cut spending, a process that started after the elections at the end of last year. Activity in Colombia has been affected for some time by the policies of the current government. It is entirely possible that the current political situation could have an impact on our current recount going forward. Elsewhere, We have managed to add several rigs in Aurora 48 market since our rig count dropped during the first quarter, and we continue to deploy rigs in other international markets. Consequently, Naver's results for the first quarter landed close to our expectations. Sequentially, as we expected, we experienced reduced activity. This was driven essentially by a five-rig reduction in Aurora 48 business. Higher turnover on contracts, with multiple rigs moving between customers, resulted in idle periods for a working fleet during the quarter. I would also highlight that our rig count today of 63 rigs has recovered to the levels we reached at the end of December. We do expect a further slight increase in rig count during the second quarter from where we currently stand. NDS activity was also affected by our lower rig count in the lower 48. International NDS activity held up relatively well during the quarter as we continued to see strength in several markets. Internationally, rig count was stable. We added one new build in Saudi Arabia, but this was offset by a reduction of one rig in our average rig count in Russia. In the month of March, we suspended activity in our three rigs in response to the recently expanded Russian sanctions. We don't expect our activity in this market to resume in the near term. I would point out, though, that our EBITDA for Russia, given the current operational challenges, has been basically break-even. Two other rigs, one in Papua New Guinea and a second one in the United Arab Emirates, reached the end of the contracts at the end of the first quarter. Given the timing, basically the end of the quarter, these rigs had limited impact on our Q1 rig count. On the plus side, we added a rig in Colombia at the end of Q1. However, we do expect future rig count reductions in that market. Looking forward to the second quarter, we expect a slight increase in our average rig count. In the quarter, we expect to deploy two new builds in Saudi Arabia, as well as three rigs in Kuwait, adding three and a half average rigs for the quarter. We also expect the lower 48 to add another three average rigs. predominantly in the Eagle Ford and Hainesville areas, and mainly for natural gas activity. These increases will be offset by the previously mentioned drop-off in Russia, P&G, the UAE, and Colombia, with a combined impact of five average rigs. Now, I'll detail our financial performance for the first quarter, provide some updates on key strategic initiatives, and share our outlook for the second quarter. Revenue from operations for the first quarter was $736 million, compared to $730 million in the prior quarter, an increase of $6 million, or 1%. Incremental revenue from our international segment and our partner acquisition compensated for a decline in lower 48 activity. U.S. sterling revenue at $231 million declined by $11 million sequentially, or 4.5%. Included in these numbers, Parker revenue was $5.3 million. Our rig count in the lower 48 averaged 61, a five-rig decrease from the fourth quarter. As mentioned, this reduction was partially related to idle time from rigs moving between contracts. We exited Q1 with 62 rigs operating in the lower 48, and we are running 63 rigs today. Our average daily revenue improved sequentially. Daily revenue in the lower 48 came in at $34,546, which is $1,150 higher than the fourth quarter. Although we have encountered some market-driven pressure on base day rates in certain regions, this was more than offset by performance-based bonuses, by an uptick in ancillary services provided to clients, and by revenue related to reimbursable moves. On our latest contracts, revenue per day is now in the $30,000 range, with some exceptions still around the mid-$30,000 level. The international drilling segment generated revenue of $382 million, an increase of 10.3 million, or 3% from the prior quarter, driven by activity increases in key markets. Parker contributed $3.8 million to this increase. Rig count increased from 84.8 to 85 rigs during the quarter. The slight increase came from the 20-day impact of Parker's two operating rigs in Kazakhstan. Drilling solutions revenue was $93.2 million, an increase of 17.2 million, or 22.6%. Parker revenue for the quarter was $21.7 million, more than upsetting the $4.5 million or 6% reduction in our legacy NDS business. Our rig technology segment generated revenue of $44.2 million, a $12 million decline sequentially, driven primarily by lower capital equipment deliveries in the Middle East and a decrease in parts sales and repairs in the U.S. Total adjusted EBITDA for the quarter was $206.3 million compared to $220.5 million in the fourth quarter. The $14 million sequential decline mainly reflected lower rig count and higher operational expenses in lower $48 trillion. Decreased EBITDA and rig technologies and our NDS legacy business also contributed to the sequential reduction. These negatives were partially upset by improved international results and the $7.8 million contribution by Parker to our first quarter EBITDA. U.S. running EBITDA of $92.7 million was down by $13 million, or 12.3% sequentially. This deterioration reflected a five-rig reduction, roughly 8%, and some erosion in daily margins in our lower $48 trillion business. Average daily rig margins came in just under $14,300, which is down $660, or 4%, from the fourth quarter. This deterioration was essentially related to the increased churn in our rig count. which made it challenging to align compensation costs with activity levels. We are actively focused on right-sizing expenses to our activity level and expect our rig operational expenses to fall back somewhat. For the second quarter, we forecast lower 48 daily margins of approximately 14,100. We expect some decline in average daily revenue, largely mitigated by cost reductions. We anticipate our average rig count in this market to be between 63 and 64 rigs. On a combined basis, Alaska and the U.S. offshore businesses generated EBITDA of $20.5 million in the first quarter. Parker Whale Board contributed approximately $800,000 to this total. Second quarter EBITDA from these businesses should be approximately $26 million, including an expected 5.3 million contribution from Parker. Rig count is expected to increase to nine rigs, including the contribution from the Parker acquisition. EBITDA from our international segment at $115.5 million increased by 3.5 million, or 3.1% sequentially. This improvement was in a slightly higher average rate of 85, including 20 days of contribution from Parker Riggs. The increase reflected an additional deployment in Saudi Arabia and strong results in other international markets. Daily gross margin was approximately $17,400, a $734 increase. Broad operational improvement drove this result. For the second quarter, we expect improved Zika data driven by deployments in Saudi Arabia and Kuwait. The 11th Saudi Arabia new build rig commenced operations earlier this month, and the 12th new build is expected to start later this quarter. In Kuwait, three rigs are returning to service and are forecast to be progressively deployed during the quarter. As mentioned before, Russia, UAE, PNG, and Colombia will decrease their rig count by a combined five rigs on the average. We forecast average daily gross margin to increase to $17,700 in the second quarter. Average rig count should range between 85 and 86 rigs, including two Parker rigs in Kazakhstan. Drilling Solutions delivered EBITDA of $40.9 million in the first quarter, up $7 million. These results include a $9.6 million contribution from Parker Wellborn. Without Parker, our NDS business fell by 7.7%, mainly driven by a decreased recount in the lower 48. Our NDS segment comprised 16% of the total EBITDA from operations. Gross margin for this segment continues to be strong, coming in at a healthy 53% this quarter, including the contribution from Parker. For the second quarter, we expect NDSEB DAO of approximately $75 million, supported by an increased lower 48 rig count and by expansion in international markets. We expect continued international growth in our performance software, RIG cloud, and managed pressure drilling offerings, as well as facing running profitability improvement in the U.S. Additionally, the Parker Wellbore acquisition will contribute a full quarter of EBITDA, or about $43 million, to our NDS results. RIG Technologies delivered EBITDA of $5.6 million in the first quarter, down sequentially from $9.2 million. Second quarter EBITDA for Richter should be similar to the first quarter. As a result of the large annual payments that normally fall in the first quarter and the heavier interest payments, the beginning of the year normally consumes cash. Nonetheless, our adjusted free cash flow for the first quarter was somewhat better than the 80 to 90 million free cash consumption we expected. Our neighbor's business, excluding Parker, consumed approximately $61 million in free cash flow. Santa's cash balances fell by only $2 million, as some of the new-build CapEx milestones were delayed into the second quarter. Santa did pay roughly $47.5 million in new-build CapEx during the first quarter. Excluding Parker, CapEx for the quarter was some $70 million below expectations, but collections were 32 million below our forecast. Although we collected 20 million in Mexico during the quarter, we were still 20 million below our target. We currently expect another large payment from our customer during the quarter. Collections in the U.S. were also sluggish. In the first quarter, we incurred approximately 14 million in costs related to the Parker transaction, including legal fees and severance costs. we have made significant progress on capturing our plant synergies from the acquisition. The Parker business consumed free cash of about $10 million post-closing. This mainly included $5 million in accrued interest that was prepaid on the redemption of the Parker terminal and $6 million in capital expenditures. CapEx for the first quarter was $144 million excluding Parker, compared to $241 million in the prior quarter. This includes $47.5 million for the San Antonio program. Excluding Parker, we maintain our target for 2025 capital expenditures in a range between $710 and $720 million, including San Antonio CapEx of approximately $360 million. In addition to these legacy expenditures, we expect Parker CapEx of $60 million. For the second quarter, we are currently targeting capital expenditures of approximately $230 million, including Parker World War CapEx of $35 million. At closing, We took on Parker's gross debt of $178 million. We have since retired that high interest rate obligation by drawing on a revolving credit facility, resulting in immediate interest savings. Our plan is to refinance this debt with a new term loan. We have launched this transaction and have received positive feedback from several participating banks. At this point, we maintain our annual guidance for both our neighbors' legacy business and for the newly acquired Parker portfolio. We expect Parker to generate approximately $150 million of EBITDA during the full year of 2025. About $130 million of this EBITDA will be part of neighbors' consolidated results for 2025, as $20 million was realized before closing. In addition, we expect to capture approximately $40 million of synergy gains in NABRS 2025 consolidated results. Our targeted synergy savings in the fourth quarter are approximately $15 million, which translates into at least $60 million in synergy savings for 2026. With that, I will turn the call to Tony for his concluding remarks.

Thank you, William. I will finish this morning with a few points. On our last earnings call, I concluded with remarks on industry volatility. I mentioned our objective is to execute through short-term disruptions while keeping neighbors poised to thrive in the future. We have constructed a strong portfolio of diversified businesses reaching major energy markets around the globe. This structure enables us to capitalize on opportunities across markets. Our international rig additions already in hand, inform our outlook. With those, we have the capability to offset challenges in other markets. I believe we have the right strategy in place, both for today's environment and for the future. I look forward to reporting our progress. Thank you for your time this morning. We'll now take your questions.

We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. If you wish to withdraw your question, please press star, then two. The first question is from Waqar Syed with ATB Capital Markets. Please go ahead.

Thank you for taking my question. Good morning. The question is on Sanad. Have you started accruing any debt in that JV right now? No, not yet.

No, and we don't plan to for now. There's no need.

Okay. And secondly, do you know if Saudi Aramco is finished with the rig releases, or do you expect there's still some more to come this quarter?

So let's back up a little bit in terms of what's happened, and then we'll give you just a thumbnail of where we are right now. So you had last year, you had on the offshore, you had 32 rigs. suspended, and one in this quarter on offshore. And on land, last year you had 31, and this quarter you had eight. So that's 39 total. Now, you also have to bear in mind that on the offshore, there were some additions, only three. But on land, last year there were 21 additions and seven additions in the first quarter. That's 28. So the net result of the Delta change was 11 rigs, okay, on land. And Obviously, all this activity is on the oil in terms of the reductions. And I think what's underappreciated is the amount of condensate Aramco is generating on their gas production. And that's driving some of this reassessment things in terms of the numbers, in addition to the sort of global oil demand issues. So that's where it sits now. And obviously, in this environment, there's Everyone has contingency plans, and obviously Rancho has contingency plans. If things drop and, you know, there will be more suspensions, but they haven't called on them yet, given where things are still. So everybody's in a wait and see attitude. And as we said, with respect to the Senate ourselves, we think we're well positioned because, number one, our existing rigs are basically in the gas play, super majority of that, and all our rigs are gas capable. So that's a real benefit we have compared to other people.

Great. Yeah, that's a great answer. And then, you know, I see in your presentation you expect a restart of a rig in Mexico. Do you have an indication from Pemex that that's going to happen, or is that just your expectation?

Yes, Pemex is keen to get that rig restarted. And obviously, as William talked about, we continue to have the dialogue with the customer about payment issues, so that remains an issue. But yes, their plans are still to restart that rig?

Well, Carter, it's in their schedule, and we believe it's going to start because it's in their plan already. We obviously need to continue. We had some positive news in the first quarter. We did manage to collect roughly the same amount we invoiced, so we stayed in place. But we are working on another transaction now to get a larger payment in the second quarter.

Great. And, Williams, you provide some good guidance on the tariffs. Which business segment gets hit the most with the tariffs? Is it technology or also drilling with drill pipe and other items?

I don't think drill pipe is the biggest hit on our drilling business. It's more like spares, pumps, things like that that over the years we have started to acquire from China. But we have alternate vendors. So the number you saw there is 10 to 20 million. That's a mitigated number. That's a number that we've we feel we can get down to if we get alternate vendors and we also change our logistics a little bit. Today, we're very centralized. A lot of the stuff coming even from China comes to the U.S. first and then is distributed across our operations for efficiency reasons. That obviously would change in the scenario that we put in place, which was 145% tariffs for China. Both of the scenarios, the range of those scenarios that we said 10 to 20, assume 145% tariffs in China. Were that to change, that number will fall dramatically, of course, because most of that tariff impact is coming from China.

The next question is from David Smith with Pickering. Please go ahead.

Hey, good morning, and thank you for taking my question.

Good morning, David.

I completely agree that CENAD stands out as a rare high-return investment in the land rig space with exceptional long-term visibility. And just given your deleveraging priorities, how do you think about the potential to accelerate the value realization from CENAD potentially via an IPO? And should we view that as one of the potential levers you could pull if market conditions deteriorate in the next year or two?

I think you can assume that that's paramount on both ARAMCO and our agenda item. It's the obvious path. When you look at valuations in the Middle East in particular, you notice there how the reward for the drillers is radically different than what it is here in terms of multiples. And we think Sennett is the most attractive company in the region. It could be in such a scenario. Obviously, we have some preparatory work be done in the meantime and and both parties are looking at that as an option obviously so it's uh it's pretty clear that that that is one path to realize value and create enormous shareholder value if you look at our last investor call slide deck we put a pro form evaluation of neighbors in it and in it there we we do some of the parts analysis and you see there an analysis for Assuming you get, you can extract that kind of multiple and the uplift, of course, is enormous. And that, of course, is one of the long-range potentials in stock over the next two years to accept that we can pull that off.

Perfect. I appreciate it. And a follow-up, if I may. William, thank you for the detailed comments on the synergies expected from the Parker acquisition, including the $15 million run rate for Q4. Can you give any color on what these additional synergy opportunities that you're seeing are in excess of the $35 million that was originally guided when the acquisition was announced?

So obviously, when we gave the guidance initially, we did not have our hands on the company yet, and a lot of the information was in a clean room, so we didn't have some of the data that later came when we assumed control of the company. indicated that the corporate cost reductions would be a bit higher. And we had more overlap in particular areas of cost, overhead costs that could be taken out as we integrate our operations. So that's where that mostly is coming from. There's other improvements in terms of real estate and other particular contracts that we also can get out of, and now we have more certainty of that. So those are the main components.

Thank you very much.

The next question is from Arun Jaryan with J.P.

Morgan. Please go ahead.

Good morning. Good afternoon, gentlemen. Good morning. Really appreciate the deck that you put out in mid-March, which highlighted the inner workings around SANA. So that was really, really helpful. Tony, I want to get your perspective. You have obviously 15... new builds thus far under the 50 rig award, which have been, you know, either in the field or under construction. What's your sense on the timing of the next five new build awards? And I just wanted to confirm that you're still on track for over $300 million of adjusted EBITDA from Sunod for 2025.

Yeah, there's been no change in the schedule. And as we've said in the prepared remarks, The next group is working its way through the system right now. So right now, we haven't seen any rethinking or backtracking on the new bill program at all. And Aramco has been pretty clear about it. And, you know, obviously we're following their lead. And I can never say never, but as far as we know right now, there's been no change in schedule at all.

So initially, Arun, just to give a little bit more color, we have discussions with Aramco and what their needs are, which are heavily oriented towards natural gas right now. And once that is determined, then we order the rig from the local provider based on an award. So the award comes first, and then we make appeal for the rig, and then we start building the rig. So that's how it works. If you look at the last year and a half, where Tony was talking about the suspensions and additions, We have had three rigs suspended, mainly oil-type rigs and smaller rigs. And we've added six new builds for SANA. So NAE versus NET plus three over that period.

Understood. Great. And my follow-up is a bit of a housekeeping question. In the slide deck, you guys highlighted how – and this is on slide 25 just for reference – You gave us a pretty detailed EBITDA outlook for 2Q by segment. Could you give us a sense of what the corporate line item could look like in 2Q with the full quarter of contribution from Parker? I believe the previous guide that you had in the March deck was about $48 million in annual corporate costs for Parker, but I know there's some synergy captures. Just trying to get what a good corporate run rate would be for the second quarter?

I think for the second quarter, of course, we will not have captured the full synergies. So that the Parker contribution should increase throughout the remainder of the year. I think we've given sufficient guidance to construct what the EBITDA would be. And obviously, it'll be a very large increase given the Parker full quarter contribution, but we also think the legacy business will increase somewhat as well. And I think the Parker contribution as a whole for the company, though, we gave you some components, but I think the EBITDA for Parker alone should be in the mid-40s for the company.

Okay. Great. Thanks a lot, William.

The next question is from Keith Mackey with RBC.

Please go ahead.

Hey, good morning, and thanks for taking my questions. I just wanted to start out on the survey that you talked about of your 14 or 14 customers with the recount going down 4% through the end of the year. Just curious on the timing on that, was that after the impact of the, or was that after the tariff announcements or during or before? And so therefore, do you think that, you know, that impact would be reflected in that 4% or is there likely some additional thinking that needs to be done based on that announcement on April 2nd?

Yes, it was after. So it was after.

Okay.

The question is, does any of that get rethought if the thing's reversed itself? Obviously, it is one outstanding issue. Or the other way, if things get worse, then does it get reassessed even more, given that it happened right after the announcement, but it was after. So that was taken into account by people, which I think that in part reflects in the numbers that you heard about. The interesting thing for us is that if you look at our mix of customer, in the first quarter, we had a huge shift in activity. I think we entered the quarter At the year end, it's 64, and then we hit low of 58, and then we exited at 62. And that mix was a mix where we shifted part of our customer base from the large publics and basically to privates a little bit. But even with that mix, if you look at our mix of customers, I think even relative to our competitors, we still have a we're dominated by the large customers in our basic mix, which, you know, I think does give us a little stability going forward because they tend to stick with it, although you can't make generalizations because some large independents in this market have aggressively moved to respond to things. So it's hard to get one generalization, but I would note we had a little bit of a shift in the customer mix to privates, but even with that, we're still dominated by the large publics.

Makes sense. Thanks for the color. And just on the international side, guiding to margins well above 17K per day, can you just talk to us a little bit more about the mix of the rigs you're adding in international versus the rigs that are going down in international? And are all of the, say, rigs you'd be adding... accretive to your average margin, not just the San Ed rigs? Or maybe help us think through that a little bit so we can get a better sense of where the margin could ultimately go through the year would be appreciated.

I think directionally, there's no question that it should be accretive in the sense that the Santa Nu bills obviously are much higher day rate margins than our average today. And even the Kuwait rigs, of course, are also higher So, you know, in the second quarter, for example, you've got five of those rigs are decided new builds and three are quite. So that right there, that should all be directionally accretive. In Latin America, you know, it's somewhat accretive. I think it depends exactly on the type of rig. But rigs redeployed from the U.S. down there are typically also going to be accretive.

So the ones that are going down are Russia basically were negative cash flow and zero EBITDA kind of. So that's certainly going to be good for margins going forward on an average basis. Of the ones that are going down, the one that was meaningful was the one in Papua New Guinea. But on the other hand, we also have a Mexico rate coming up, which is also high margin. So I think all in all, high margins for the rigs coming on, and low margins for most of the rigs that are going down.

Got it. And one more, if I could sneak it in, just on the SANAD new build timing from, say, award to delivery or award to when they start drilling. What roughly is that timing now? Like, how long would it take if you got an award, say, today, to get a rig built in in the field?

About one year from award to delivery.

And by the way, we think over the next couple months, we'll get the POs, the awards, and consequently order the rigs.

Got it. Okay. Thanks very much.

I'll just qualify that, though. It takes one year from award to delivery, but obviously we do We do order the rigs for deliveries that are a little bit phased, so we don't have all five rigs arriving on the same day. That would be not manageable in terms of bringing five rigs up at the same time.

The next question is from Jeff LeBlanc with TPH. Please go ahead.

Good morning, Tony and team. Thank you for taking my question. Sure. I just wanted to see if you could talk about Quail's exposure to steel tariffs and how any tariffs are considered in the outlook for Quail and then Parker more broadly. Thank you.

Yeah. I think there's going to be some impact, but we think the impact with logistics, as we refer to in terms of our sourcing capabilities, as well as customer negotiations, it should be a limited impact on Quail. And, you know, I know NOV's comments about the tariffs in terms of their ability to deal with it. So they're obviously one supplier, but not our only one. And, you know, some of the stuff has already been preplanned. So I think all in all, we think between customer responses and the other logistics aspects, we can handle it pretty well.

By the way, the majority is not coming from China. We also are getting some deliveries from Europe and some from the U.S., so. So the part that's from China needs to be mitigated, and obviously conversations with clients will be very important in getting that part mitigated.

Thank you very much for the call. I'll hand the call back to the operator. Thank you.

And the final question is from John Daniel with Daniel Energy Partners. Please go ahead.

Good morning, guys. Thanks for including me. I just have two quick ones. First, Tony, if the tariff conundrum persists, would you expect to see any pushback from international operators on U.S. service providers?

No. Okay. How's that?

I mean, I think the, yeah. That's fine. I'm just curious. The amount of multidirectional transfers of stuff, I think mitigates everything in the international part.

Yeah.

And then when you all did this survey... Did you mention, John, that we're going to have a negative thing for U.S. providers because the clients are upset at the U.S.? Or did you mean cost-wise?

I'm just saying if they're pissed off at, you know, our policies and they want to push back on our industry, that's all.

No, I don't think so. We have a lot of other problems for people to push back on. I don't think translating... That one problem to all the other jurisdictions is something that is happening right now.

Fair enough. I was just curious. The second one, when you all did the survey this quarter, were you positively or negatively surprised by the responses?

I was actually positively surprised in the sense that with all the negativity out there, I was looking to see that the numbers, especially given the timing, That was going to be falling off the cliff. It would be falling off the cliff, but it wasn't, which that's why I gave you some comments about our customer base as well. But, yeah, I think from my own personal point of view, I don't know what the other operating guys, what they all thought, but from my own personal point of view, I was more pleasantly surprised because I thought given what happened right after we did this thing that panic would have been set in, but it had not happened yet. So, again, whether there's a delayed reaction at work, I can't tell you. And obviously, we're reaching $60 today. Today's not the kind of day I want to have this kind of conference call on. But, you know, leaving those things aside, I think I was positively impacted.

And by the way, you know, I was even more positively impressed by the fact that our customer base tends to be a little bit skewed. We have a lot of majors and big guys, which are some of the guys that have been cutting because of the consolidation. And that number seems really mitigated, but more impressive to me is what the team has done, because in the first quarter, we saw a lot of that as well, right? But they have managed to replace the rigs with other clients that are not necessarily in our survey. And there's been some growth in other clients that have not been traditional clients for us over the past year or so. And we've gained some ground with those clients to the point that our rig count went up quite a bit from our trough in the first quarter to where we're standing today.

And incidentally, we are at 64 today.

We just hit 64. We just got an email.

Yeah, so we just hit 64. There you go.

We just hit 64 today.

But like I said, It's all in the context of what's happening in the world today. So, there is absolutely no guarantees about rig count, given what's happening in the world. That's for sure.

Yeah. Totally get it. All right. Hey, guys, thanks for including me. Thank you, John. Thanks, John.

This concludes our question and answer session. I'd like to turn the conference back over to Mr. Conroy for any closing remarks.

Thank you, everyone, for joining us today. If you care to follow up, please reach out to us. And Gaylene, with that, we will conclude the call.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.