NBR — Nabors Industries Ltd.

Nabors Industries Limited (NBR) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Consolidated Revenue: $784 million, a sequential decline attributed to seasonal reductions and logistics disruptions.
• Adjusted EBITDA: $205 million, representing an EBITDA margin of 26.1%, down from the previous quarter.
• International Drilling Revenue: $419 million, with EBITDA of $121 million (margin of 28.9%).
• U.S. Drilling Revenue: $241 million, EBITDA of $88 million (margin of 36.5%).
• Average Rig Count: 93 rigs active, slightly above guidance.
• Free Cash Flow: Consumed $48 million, but outperformed expectations largely due to better working capital management.

2. Strategic Updates and Business Highlights

• Middle East Operations: Maintained operational tempo with 53 rigs in Saudi Arabia, 4 in Oman, and 3 in Kuwait. Despite regional conflicts, client activity remained stable.
• Rig Additions: Increased U.S. rig count to 66, with plans to reach 69 by the end of Q2 2026. Added 4 rigs in Q1, with a total of 8 added since November 2025.
• Technology Deployment: Continued rollout of high-spec rigs, including the PACE-X Ultra, which enhances operational efficiency and performance.
• Venezuela Operations: Discussions ongoing to resume operations with potential high returns under favorable conditions.

3. Forward Guidance and Outlook

• Q2 2026 Guidance: Expect average rig count in International Drilling to range from 93 to 95 rigs, with average daily gross margin projected to improve to $17,400-$17,500.
• U.S. Drilling Outlook: Anticipate maintaining rig count at 69 through the second half of the year, with pricing expected to trend higher into the mid-$30,000 range.
• Long-Term Goals: Aim to reduce net debt leverage to approximately 1x over the long term, with a focus on using free cash flow for debt reduction.

4. Bad News, Challenges, or Points of Concern

• Logistical Challenges: Ongoing operational inefficiencies in the Middle East due to conflict-related disruptions affecting logistics and supply chains.
• Market Volatility: Oil price fluctuations and backwardation in futures pricing are tempering near-term drilling activity expectations.
• Rig Pricing Pressure: While pricing is expected to improve, the overall market remains constrained, and large public operators are cautious in increasing capital spending.
• International Rig Count Decline: Despite growth in international drilling, the overall Baker Hughes rig count has declined, indicating broader market challenges.

5. Notable Q&A Insights

• Rig Reactivation Costs: Discussion on the costs and pricing dynamics associated with reactivating rigs beyond the planned count, indicating a cautious approach to growth.
• Capital Allocation Priorities: Emphasis on debt reduction as the top priority, with potential for shareholder returns considered only after achieving a more favorable leverage position.
• Saudi Arabia's Market Dynamics: Insights into the potential for increased activity post-conflict, with a focus on gas drilling and the strategic positioning of Nabors in the region.
• Free Cash Flow Expectations: Optimism about exceeding free cash flow guidance due to improved activity outlook and disciplined capital management.

Overall, Nabors Industries demonstrated resilience in a challenging environment, with a focus on strategic growth, operational efficiency, and financial discipline, while navigating significant regional headwinds.