NBR — Nabors Industries Ltd.

Nabors Industries Ltd. Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Fourth Quarter Revenue: $798 million, a decrease of 2.6% sequentially, primarily due to the divestiture of Quail Tools.
• Adjusted EBITDA: $222 million, with an EBITDA margin of 27.8%, down 110 basis points from the previous quarter.
• Full Year 2025 Revenue: $3.2 billion, an 8.7% year-over-year increase.
• Full Year Adjusted EBITDA: $913 million, up $31 million from the previous year.
• Net Debt Reduction: $554 million, bringing total net debt to its lowest level since 2005.
• Adjusted Free Cash Flow: $132 million in Q4; full year adjusted free cash flow reached approximately $117 million, exceeding guidance.

2. Strategic Updates and Business Highlights

• Acquisitions and Divestitures: Successfully integrated Parker Wellbore while divesting Quail Tools, which is expected to enhance operational efficiency and financial performance.
• International Expansion: Growth in the International Drilling segment, with revenue of $424 million, up 4.1% sequentially, driven by increased rig count and activity in regions like Saudi Arabia and Mexico.
• Rig Count: Increased to 66 rigs recently in the Lower 48, with a focus on gas-directed drilling, which now comprises 20% of the overall rig count.
• Technology Deployment: Continued success with the PACE-X Ultra rig, which has shown strong performance and interest from operators.

3. Forward Guidance and Outlook

• 2026 EBITDA Forecast: Expected to match 2025 levels, with growth anticipated in several operations offsetting the impact of the Quail divestiture.
• Rig Count Expectations: Anticipated average rig count in the Lower 48 to be between 61 to 64 rigs, with a cautious outlook for the second half of the year.
• International Drilling: Projected average rig count of 96 to 98 rigs, with a focus on new builds in Saudi Arabia and returning rigs in Argentina.
• Daily Gross Margin Guidance: Expected to stabilize around $13,200 for the first quarter.

4. Bad News, Challenges, or Points of Concern

• Revenue Decline: Sequential revenue decrease attributed to the divestiture of Quail Tools and challenges in the U.S. market.
• Market Volatility: Ongoing uncertainty in oil prices due to geopolitical factors and supply-demand imbalances, with a cautious outlook for the second half of 2026.
• Operational Challenges: Activity disruptions in Colombia and maintenance days in Saudi Arabia affected performance in the International Drilling segment.
• Cash Flow Consumption: SANAD joint venture expected to consume $100 million to $120 million in adjusted free cash flow in 2026, impacting overall cash flow.

5. Notable Q&A Insights

• Lower 48 Outlook: Management expressed confidence in the rig count increase to 64-65, driven by public operators and a shift toward longer lateral drilling.
• Saudi Arabia Operations: High confidence in the activation timelines for suspended rigs and new builds, despite a tight labor market.
• Mexico Activity: Positive developments with a fourth platform rig returning to work, alongside improved payment conditions from Pemex.
• Investment Strategy: Emphasis on disciplined capital allocation and debt reduction, with plans to further reduce gross debt by at least $100 million in 2026.

Overall, Nabors Industries Ltd. demonstrated resilience in its financial performance and strategic initiatives, while navigating challenges in the market environment. The company remains focused on growth opportunities, particularly in international markets, and is committed to strengthening its balance sheet.