Nabors' EPS Equals $0.18 for 4Q and $1.29 for Full Year 2009, Before Non-Cash
Charges and Impairments
</pre>
<p>HAMILTON, <span class="xn-location">Bermuda</span>, <span class="xn-chron">Feb. 16</span> /CNW/ -- Nabors Industries Ltd. (NYSE: NBR) today announced its results for the fourth quarter and full year 2009. The Company's net income, excluding previously disclosed non-cash charges, was <span class="xn-money">$51.5 million</span> (<span class="xn-money">$0.18</span> per diluted share) in the fourth quarter and <span class="xn-money">$369.4 million</span> (<span class="xn-money">$1.29</span> per diluted share) for the full year. On the same basis the quarter's adjusted income derived from operating activities was <span class="xn-money">$133 million</span>, bringing the total for the full year to <span class="xn-money">$664 million</span>. Revenues for the Company were <span class="xn-money">$841 million</span> for the quarter and <span class="xn-money">$3.7 billion</span> for the full year.</p>
<p/>
<p><span class="xn-person">Gene Isenberg</span>, Nabors' Chairman and CEO, commented, "The quarter's sequential improvement was fueled by higher activity in our US Offshore, US Lower 48 Land Drilling and Well Servicing operations, bolstered by seasonal ramp-ups in Alaska and <span class="xn-location">Canada</span>. These increases more than offset the predicted decrease in our International business. We are confident the third quarter marked the bottom in our consolidated quarterly results, and we expect continuous sequential improvement from here, although we remain cautious as to the pace and magnitude.</p>
<p/>
<p>"As we predicted, the full year's results excluding non-cash charges proved to be relatively resilient considering the sharp contraction in industry activity. Despite nearly 100 fewer rigs operating, our US Lower 48 Land Drilling business still managed to generate <span class="xn-money">$295 million</span> in operating income and <span class="xn-money">$522 million</span> in operating cash flow, much of which was attributable to the high number of term contracts in force. Our International operations were impacted more than we previously anticipated, but still managed to post a respectable year at <span class="xn-money">$366 million</span> in operating income and <span class="xn-money">$575 million</span> in operating cash flow despite challenging market conditions. These results make International our most profitable unit, a position it will likely retain for the foreseeable future. In the aggregate, our other businesses contributed another <span class="xn-money">$138 million</span> in operating income and <span class="xn-money">$385 million</span> in operating cash flow, resulting in nearly <span class="xn-money">$1.5 billion</span> in operating cash flow before corporate expenses.</p>
<p/>
<p>"This strong operating cash flow, along with reduced working capital and the early January placement of <span class="xn-money">$1.125 billion</span> in ten-year notes, allowed us to fund nearly <span class="xn-money">$1.0 billion</span> in capital expenditures, repurchase <span class="xn-money">$1.07 billion</span> in shorter-term convertible debt at a savings of <span class="xn-money">$126 million</span>, and retire <span class="xn-money">$225 million</span> in term debt. We still generated free cash flow of <span class="xn-money">$370 million</span> and ended the year with <span class="xn-money">$1.2 billion</span> in cash and marketable securities. With this healthy balance, ongoing strong cash generation and continuing good access to the capital markets, we expect to be able to fund growth opportunities as they arise and comfortably redeem the remaining balance of our <span class="xn-money">$1.68 billion</span> in convertible debt due <span class="xn-chron">May 2011</span>.</p>
<p/>
<p>"In our US Lower 48 Land Drilling business, we started-up 20 rigs during the quarter, bringing our average rig count to 139, compared to 124 in the third quarter. The average number of rigs idle but generating revenue declined from 24 to 19. Today we have a total of 160 rigs employed with 147 rigs working and 13 idle. Our average rig margin of <span class="xn-money">$9,136</span> per day reflected a sequential decrease of <span class="xn-money">$537</span>. We have deployed an additional eight new built PACE® rigs since the end of the third quarter and have another eight yet to deploy, including four incremental five-year contract awards from a key customer for use in the Bakken Shale. Our PACE® rigs continue to perform exceptionally well and regularly achieve new performance records. Today virtually all of our PACE® fleet is committed and we are seeing pricing improvement in the spot market, although renewal rates are still significantly below those of expiring contracts. This has the effect of dampening the financial benefit of the fourth quarter increase in rig activity. Over the next several months we have 20 long-term rig contracts renewing at lower rates, producing a drop in first quarter average margins of approximately <span class="xn-money">$1,200</span> per day, but stabilizing thereafter. Consequently, while we expect improving quarterly performance going forward, operating income and cash flow for this segment in 2010 will be well below the level we achieved in 2009, although this unit's timely efforts to reduce overhead, internal and third party operating costs are mitigating this decline. The full utilization of our PACE® rigs has improved the market for our SCR rigs proportionately as these rigs are particularly well suited to the deeper, longer duration wells in areas such as Eagle Ford and Haynesville. Similarly, the increase in high-end rig utilization is benefitting our more capable mechanical rigs, albeit at much lower margins and in smaller increments.</p>
<p/>
<p>"Internationally, we believe the first quarter will mark the bottom for this segment with results moderately below the <span class="xn-money">$74 million</span> in operating income achieved in the fourth quarter. We see the rig count increasing in the later stages of the first quarter, but the precise timing of these projects is always difficult to estimate, and there are unique circumstances leading to delayed contract awards and renewals in certain areas. We recently received an award for eight rigs in <span class="xn-location">Colombia</span>, six of which are incremental, and we have other awards pending in multiple venues. In <span class="xn-location">Mexico</span>, the last three of our six deep land rigs are slated to restart during the second quarter with our three idle platform rigs scheduled for the third quarter, although customer funding priorities may impact the timing of these deployments. We were also recently awarded a project in <span class="xn-location">Papua New Guinea</span> for two new, seismically rated land drilling rigs patterned after our proprietary MODS(TM) dynamic offshore design. These and numerous other prospective projects all reinforce our belief that our International segment will achieve continuous sequential increases in income starting in the second quarter and return to a healthy growth rate over the next few years.</p>
<p/>
<p>"Our US Land Well-servicing business posted a significant sequential increase as work hours for both rigs and trucks increased in each month of the fourth quarter. We have increased our expectations for this year, but they remain well below the level achieved in previous years. We expect that oil prices are likely to improve over time and, given the quality and performance of our Millennium rigs, a more robust outlook for the second half of 2010 and especially 2011 is all but certain. We are reinforcing our management in this unit and continue to take additional measures to reduce costs and expand the markets we serve.</p>
<p/>
<p>"Our US Offshore business posted a solid quarter as activity rebounded sharply from the third quarter. We continue to have high utilization in the deepwater platform rig market where we enjoy virtually 100% market share. While the first quarter has gotten off to a slower than expected start due to numerous weather-related delays, we are seeing our more conventional platform and workover jackup rig activity improve, although most of these projects are short term in duration. Still, contracted income for 2010 is expected to be 30% greater than our full year results in 2009, up from 20% just last quarter. We have also received a tentative award for a new rig as a result of one of two FEED studies for new deepwater platform rigs that we conducted and are cautiously optimistic regarding our success with the second project.</p>
<p/>
<p>"Our Canadian unit improved to breakeven in the fourth quarter, partially attributable to extensive cost reductions. We expect the first quarter to show a large increase during the peak winter drilling season, approximating last year's first quarter results. While these results are good for the current market conditions, they are still well below recent years. Visibility regarding timing of an eventual turnaround in this market remains limited; however, we remain optimistic about our long-term future in <span class="xn-location">Canada</span>. We believe our assets are particularly well suited to the changing market there, particularly the northeast British Columbia shale plays which require more sophisticated rigs and in which we have a strong market share.</p>
<p/>
<p>"In Alaska, we achieved a modest increase in the quarter, bringing the full-year results to the best in that unit's history. The outlook is challenging, however, as we expect to have at least three fewer rigs under contract in 2010. As a result, our expectation is that the year will likely be approximately 40% below 2009 and represent the bottom in this market. Over the longer term, there are several strategic projects that could significantly bolster results in subsequent years. Sustained high oil prices and the realization of contemplated tax incentives by the State of Alaska should also improve the outlook.</p>
<p/>
<p>"Our Other Operating Segments also posted a modest increase as third-party sales in Canrig increased materially, while Ryan Technologies, our directional drilling entity, ramped up for Canada's winter drilling season. We expect the first quarter to show additional improvement for the same reasons and further benefit from higher seasonal activity in our Alaskan joint ventures. New technology rollouts in Canrig should be increasingly reflected in this segment's bottom line longer term.</p>
<p/>
<p>"Our Oil and Gas interests again incurred significant non-cash charges which obscure the inherent value we see in these holdings, as indicated in our pre-release. We expect over time that this value will become more apparent as contributions to income increase and we prove up more of the core acreage holdings we possess.</p>
<p/>
<p>"The effective tax rate for 2009, exclusive of non-cash items, was 10%, yielding an 8% effective tax rate for the fourth quarter which is in line with our expectations. This favorable tax rate arises from the fact that our international blended tax rate approximates 15%, while our US and Canadian taxes are minimal due to diminished income, actual losses incurred in some of these entities, and the additional interest expense associated with the 9.25 percent notes we issued in <span class="xn-chron">January 2009</span>.</p>
<p/>
<p>"In summary, it was a very challenging year both financially and operationally, although we fared relatively well in the face of the most abrupt decline in rig activity we have ever experienced, and considering the uncertainty that permeated the early part of the year. It is my belief that our oil-directed markets are in a secular growth phase due to long-term demand trends and the need for more sophisticated and intense drilling to sustain production from legacy fields. Our position in North American gas is solid due to our large share of the premium rig market, our concentration in the best markets and the unrecognized value of our oil and gas interests. The inherent benefit of our premium rigs, particularly our PACE® rigs, was manifested in the higher utilization and margins we maintained throughout the trough and their rapid rebound as our US land rig count began to recover in the latter part of the year. We are quite bullish over the longer term for all of our businesses, but remain uncertain as to the precise timing of a meaningful inflection, although I anticipate it may well be as soon as the second half of this year."</p>
<p/>
<p>The Nabors companies own and operate approximately 542 land drilling and approximately 730 land workover and well-servicing rigs in <span class="xn-location">North America</span>. Nabors' actively marketed offshore fleet consists of; 40 platform rigs, 13 jackup units and 3 barge rigs in the <span class="xn-location">United States</span> and multiple international markets. In addition, Nabors manufactures top drives and drilling instrumentation systems and provides comprehensive oilfield hauling, engineering, civil construction, logistics and facilities maintenance, and project management services. Nabors participates in most of the significant oil and gas markets in the world.</p>
<p/>
<p>The information above includes 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 Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements.</p>
<p/>
<p>For further information, please contact Dennis A. Smith, Director of Corporate Development for Nabors Corporate Services, Inc. at 281-775-8038. To request Investor Materials, contact our corporate headquarters in Hamilton, <span class="xn-location">Bermuda</span> at 441-292-1510 or via email at <a href="mailto:[email protected]">[email protected]</a></p>
<pre>
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended
------------------
December 31, September 30,
(In thousands, except per share ------------ -------------
amounts) 2009 2008 2009
---- ---- ----
Revenues and other income:
Operating revenues $834,527 $1,475,076 $791,915
Earnings (losses) from
unconsolidated affiliates (1) (155,584) (229,283) 13,457
Investment income (loss) 172 (7,278) (1,805)
--- ------ ------
Total revenues and other
income 679,115 1,238,515 803,567
------- --------- -------
Costs and other deductions:
Direct costs 460,267 816,835 432,876
General and administrative
expenses 76,462 129,101 82,050
Depreciation and amortization 168,917 167,156 174,372
Depletion 2,440 (3,242) 3,295
Interest expense 65,172 50,105 66,671
Losses (gains) on sales and
retirements of long-lived assets
and other expense (income), net 12,196 (3,866) 10,323
Impairments and other charges (2) 112,046 176,123 -
------- ------- ---
Total costs and other
deductions 897,500 1,332,212 769,587
------- --------- -------
Income (loss) before income
taxes (4) (218,385) (93,697) 33,980
-------- ------- ------
Income tax expense (benefit):
Current 6,400 (33,721) 37,901
Deferred (177,559) 46,037 (34,346)
-------- ------ -------
Total income tax expense
(benefit) (171,159) 12,316 3,555
-------- ------ -----
Net income (loss) (47,226) (106,013) 30,425
Less: Net (income) loss
attributable to noncontrolling
interest (34) (690) (895)
--- ---- ----
Net income (loss) attributable to
Nabors (4) $(47,260) $ (106,703) $ 29,530
-------- --------- --------
Earnings (losses) per Nabors
share: (3) (4)
Basic $ (.17) $ (.38) $ .10
Diluted $ (.17) $ (.38) $ .10
Weighted-average number
of common shares
outstanding: (3)
Basic 283,854 283,081 283,197
------- ------- -------
Diluted 283,854 283,081 287,407
------- ------- -------
Adjusted income (loss) derived
from operating activities (1) (5) $(29,143) $ 135,943 $112,779
======== ========== ========
Year Ended
----------
December 31,
(In thousands, except per share ------------
amounts) 2009 2008
---- ----
Revenues and other income:
Operating revenues $3,692,356 $5,511,896
Earnings (losses) from
unconsolidated affiliates (1) (214,681) (229,834)
Investment income (loss) 25,756 21,726
------ ------
Total revenues and other
income 3,503,431 5,303,788
--------- ---------
Costs and other deductions:
Direct costs 2,012,352 3,110,316
General and administrative
expenses 429,663 479,984
Depreciation and amortization 668,415 614,367
Depletion 11,078 25,442
Interest expense 264,948 196,718
Losses (gains) on sales and
retirements of
long-lived assets and other
expense (income), net 12,962 15,027
Impairments and other charges (2) 339,129 176,123
------- -------
Total costs and other
deductions 3,738,547 4,617,977
--------- ---------
Income (loss) before income
taxes (4) (235,116) 685,811
-------- -------
Income tax expense (benefit):
Current 50,333 188,832
Deferred (199,561) 17,315
-------- ------
Total income tax expense
(benefit) (149,228) 206,147
-------- -------
Net income (loss) (85,888) 479,664
Less: Net (income) loss
attributable to noncontrolling
interest 342 (3,927)
--- ------
Net income (loss) attributable to
Nabors (4) $ (85,546) $ 475,737
---------- ----------
Earnings (losses) per Nabors
share: (3) (4)
Basic $ (.30) $ 1.69
Diluted $ (.30) $ 1.65
Weighted-average number
of common shares outstanding: (3)
Basic 283,326 281,622
------- -------
Diluted 283,326 288,236
------- -------
Adjusted income (loss) derived
from operating activities (1) (5) $ 356,167 $1,051,953
========== ==========
</pre>
<p> </p>
<pre>
(1) Includes our proportionate share of full-cost ceiling test
writedowns recorded by our oil and gas joint ventures of $(162.1)
million and $(228.3) million for the three months ended December 31,
2009 and 2008, respectively, and $(237.1) million and $(228.3)
million for the years ended December 31, 2009 and 2008,
respectively.
</pre>
<p> </p>
<pre>
(2) Represents impairments and other charges recorded for the three
months ended December 31, 2009 and 2008, and for the years ended
December 31, 2009 and 2008, respectively. See detail of Impairments
and other charges at "Summary of Non-Cash Charges (Non-GAAP)"
included herein as a separate schedule.
</pre>
<p> </p>
<pre>
(3) See "Computation of Earnings (Losses) Per Share" included herein as
a separate schedule.
</pre>
<p> </p>
<pre>
(4) See impact of Impairments and other charges at "Consolidated
Statements of Income (Loss) Excluding Certain Non-Cash Items
(Non-GAAP)" included herein as a separate schedule.
</pre>
<p> </p>
<pre>
(5) Adjusted income (loss) derived from operating activities is computed
by subtracting direct costs, general and administrative expenses,
depreciation and amortization, and depletion expense from Operating
revenues and then adding Earnings (losses) from unconsolidated
affiliates. Such amounts should not be used as a substitute to
those amounts reported under accounting principles generally
accepted in the United States of America ("GAAP"). However,
management evaluates the performance of our business units and the
consolidated company based on several criteria, including adjusted
income derived from operating activities, because it believes that
this financial measure is an accurate reflection of the ongoing
profitability of our Company. A reconciliation of this non-GAAP
measure to income before income taxes, which is a GAAP measure, is
provided within the table set forth immediately following the
heading "Segment Reporting".
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) EXCLUDING CERTAIN NON-
CASH CHARGES (NON-GAAP)
(Unaudited)
Three Months Ended
------------------
December 31, 2009
-----------------
As adjusted
to Exclude
(In thousands, except per Actuals Charges
share amounts) (GAAP) Charges (Non-GAAP)(1)
------ ------- -------------
Revenues and other income:
Operating revenues $834,527 $ - $834,527
Earnings (losses) from
unconsolidated
affiliates (155,584) 162,121 6,537
Investment income 172 - 172
--- --- ---
Total revenues
and other income 679,115 162,121 841,236
------- ------- -------
Costs and other deductions:
Direct costs 460,267 - 460,267
General and
administrative
expenses 76,462 - 76,462
Depreciation and
amortization 168,917 - 168,917
Depletion 2,440 - 2,440
Interest expense 65,172 - 65,172
Losses (gains) on sales
and retirements of
long-lived assets and
other expense (income),
net 12,196 - 12,196
Impairments and other
charges 112,046 (112,046) -
------- -------- -------
Total costs and other
deductions 897,500 (112,046) 785,454
------- -------- -------
Income (loss) before
income taxes (218,385) 274,167 55,782
Income tax expense
(benefit) (171,159) 175,383 4,224
-------- ------- -----
Net income (loss) (47,226) 98,784 51,558
Less: Net (income) loss
attributable to
noncontrolling
interest (34) - (34)
--- --- ---
Net income (loss)
attributable to Nabors $(47,260) $98,784 $ 51,524
-------- ------- --------
Earnings (losses) per
Nabors share - diluted $(.17) $ .34(2) $ .18
Weighted-average number
of common shares
outstanding - diluted 283,854 289,427
------- -------
Adjusted income (loss)
derived from operating
activities (3) $(29,143) $162,121 $132,978
========= ======== ========
</pre>
<p> </p>
<p> </p>
<pre>
Year Ended
----------
December 31, 2009
-----------------
As adjusted
to Exclude
(In thousands, except per Actuals Charges
share amounts) (GAAP) Charges (Non-GAAP)(1)
------ ------- -------------
Revenues and other income:
Operating revenues $3,692,356 $ - $3,692,356
Earnings (losses) from
unconsolidated
affiliates (214,681) 245,416 30,735
Investment income 25,756 - 25,756
------ --- ------
Total revenues
and other income 3,503,431 245,416 3,748,847
--------- ------- ---------
Costs and other deductions:
Direct costs 2,012,352 - 2,012,352
General and
administrative
expenses 429,663 (62,114) 367,549
Depreciation and
amortization 668,415 - 668,415
Depletion 11,078 - 11,078
Interest expense 264,948 - 264,948
Losses (gains) on sales
and retirements of
long-lived assets and
other expense (income),
net 12,962 - 12,962
Impairments and other
charges 339,129 (339,129) -
------- -------- ---
Total costs and other
deductions 3,738,547 (401,243) 3,337,304
--------- -------- ---------
Income (loss) before
income taxes (235,116) 646,659 411,543
Income tax expense
(benefit) (149,228) 191,734 42,506
-------- ------- ------
Net income (loss) (85,888) 454,925 369,037
Less: Net (income) loss
attributable to
noncontrolling
interest 342 - 342
--- --- ---
Net income (loss)
attributable to Nabors $ (85,546) $454,925 $ 369,379
---------- -------- ----------
Earnings (losses) per
Nabors share - diluted $ (.30) $ 1.59 $ 1.29
Weighted-average number
of common shares
outstanding - diluted 283,326 286,502
------- -------
Adjusted income (loss)
derived from operating
activities (3) $356,167 $307,530 $663,697
======== ======== ========
(1) As-adjusted amounts include Non-GAAP financial measures. These
measures are presented to provide management and investors an
opportunity to make meaningful assessments and comparisons of results
from operations, exclusive of certain charges detailed below. The
presentation of Non-GAAP information is not intended to suggest
that such information is superior to the presentation of GAAP
information, but only to clarify some information and assist the
reader.
</pre>
<p> </p>
<pre>
(2) The after-tax impact of the charges recorded during the fourth quarter
of 2009 was $.65 per diluted share, as noted in our press release
dated February 9, 2010. The difference between this amount and the
$.35 per diluted share noted in the table above relates to the tax
benefits associated with charges recorded during the second quarter of
2009 that are required to be allocated to the current period in
accordance with the interim period tax allocation rules.
</pre>
<p> </p>
<pre>
(3) Adjusted income (loss) derived from operating activities is computed
by: subtracting direct costs, general and administrative expenses,
depreciation and amortization, and depletion expense from Operating
revenues and then adding Earnings (losses) from unconsolidated
affiliates. Such amounts should not be used as a substitute to those
amounts reported under GAAP. However, management evaluates the
performance of our business units and the consolidated company based
on several criteria, including adjusted income derived from operating
activities, because it believes that this financial measure is an
accurate reflection of the ongoing profitability of our Company.
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) EXCLUDING CERTAIN NON-
CASH CHARGES (NON-GAAP)
(Unaudited)
Three Months Ended
------------------
December 31, 2008
-----------------
As adjusted
to Exclude
(In thousands, except per Actuals Charges
share amounts) (GAAP) Charges Non-GAAP) (1)
------ ------- -------------
Revenues and other income:
Operating revenues $1,475,076 $ - $1,475,076
Earnings (losses) from
unconsolidated
affiliates (229,283) 228,252 (1,031)
Investment income
(loss) (7,278) - (7,278)
------ --- ------
Total revenues
and other income 1,238,515 228,252 1,466,767
--------- ------- ---------
Costs and other deductions:
Direct costs 816,835 - 816,835
General and
administrative
expenses 129,101 - 129,101
Depreciation and
amortization 167,156 - 167,156
Depletion (3,242) - (3,242)
Interest expense 50,105 - 50,105
Losses (gains) on sales
and retirements of
long-lived assets and
other expense (income),
net (3,866) - (3,866)
Impairments and other
charges 176,123 (176,123) -
------- -------- ---
Total costs and other
deductions 1,332,212 (176,123) 1,156,089
--------- -------- ---------
Income (loss) before
income taxes (93,697) 404,375 310,678
Income tax expense
(benefit) 12,316 89,680 101,996
------ ------ -------
Net income (loss) (106,013) 314,695 208,682
Less: Net (income) loss
attributable to
noncontrolling
interest (690) - (690)
---- --- ----
Net income (loss)
attributable to Nabors $ (106,703) $314,695 $ 207,992
---------- -------- ----------
Earnings (losses) per
Nabors share - diluted $ (.38) $ 1.11 $ .73
Weighted-average number
of common shares
outstanding - diluted 283,081 283,530
------- -------
Adjusted income (loss)
derived from operating
activities (2) $135,943 $228,252 $364,195
======== ======== ========
Year Ended
----------
December 31, 2008
-----------------
As adjusted
to Exclude
(In thousands, except per Actuals Charges
share amounts) (GAAP) Charges (Non-GAAP)(1)
------ ------- -------------
Revenues and other income:
Operating revenues $5,511,896 $ - $5,511,896
Earnings (losses) from
unconsolidated
affiliates (229,834) 228,252 (1,582)
Investment income
(loss) 21,726 - 21,726
------ --- ------
Total revenues
and other income 5,303,788 228,252 5,532,040
--------- ------- ---------
Costs and other deductions:
Direct costs 3,110,316 - 3,110,316
General and
administrative
expenses 479,984 - 479,984
Depreciation and
amortization 614,367 - 614,367
Depletion 25,442 - 25,442
Interest expense 196,718 - 196,718
Losses (gains) on
sales and retirements of
long-lived assets and
other expense (income),
net 15,027 - 15,027
Impairments and other
charges 176,123 (176,123) -
------- -------- ---
Total costs and other
deductions 4,617,977 (176,123) 4,441,854
--------- -------- ---------
Income (loss) before
income taxes 685,811 404,375 1,090,186
Income tax expense
(benefit) 206,147 89,680 295,827
------- ------ -------
Net income (loss) 479,664 314,695 794,359
Less: Net (income) loss
attributable to
noncontrolling
interest (3,927) - (3,927)
------ --- ------
Net income (loss)
attributable to Nabors $ 475,737 $314,695 $ 790,432
---------- -------- ----------
Earnings (losses) per
Nabors share - diluted $1.65 $ 1.09 $ 2.74
Weighted-average number
of common shares
outstanding - diluted 288,236 288,236
------- -------
Adjusted income derived
from operating
activities (2) $1,051,953 $228,252 $1,280,205
========== ======== ==========
(1) As-adjusted amounts include Non-GAAP financial measures. These
measures are presented to provide management and investors an
opportunity to make meaningful assessments and comparisons of results
from operations, exclusive of certain charges detailed below. The
presentation of Non-GAAP information is not intended to
suggest that such information is superior to the presentation of
GAAP information, but only to clarify some information and assist the
reader.
</pre>
<p> </p>
<pre>
(2) Adjusted income (loss) derived from operating activities is computed
by: subtracting direct costs, general and administrative expenses,
depreciation and amortization, and depletion expense from Operating
revenues and then adding Earnings (losses) from unconsolidated
affiliates. Such amounts should not be used as a substitute to those
amounts reported under GAAP. However, management evaluates the
performance of our business units and the consolidated company based
on several criteria, including adjusted income derived from operating
activities, because it believes that this financial measure is an
accurate reflection of the ongoing profitability of our Company.
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, September 30, December 31,
(In thousands, except ratios) 2009 2009 2008
---- ---- ----
ASSETS
Current assets:
Cash and short-term investments $ 1,090,851 $ 1,104,163 $ 584,245
Accounts receivable, net 724,040 702,712 1,160,768
Other current assets 380,973 284,211 421,580
------- ------- -------
Total current assets 2,195,864 2,091,086 2,166,593
Long-term investments and other
receivables 100,882 138,093 239,952
Property, plant and equipment, net 7,646,050 7,728,506 7,331,959
Goodwill 164,265 163,984 175,749
Investment in unconsolidated
affiliates 306,608 473,420 411,727
Other long-term assets 250,221 202,002 191,919
------- ------- -------
Total assets $10,663,890 $10,797,091 $10,517,899
=========== =========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 163 $ 280 $ 225,030
Other current liabilities 608,459 663,595 903,829
------- ------- -------
Total current liabilities 608,622 663,875 1,128,859
Long-term debt 3,940,605 4,084,587 3,600,533
Other long-term liabilities 932,684 864,447 870,083
------- ------- -------
Total liabilities 5,481,911 5,612,909 5,599,475
Equity:
Shareholders' equity 5,167,656 5,170,153 4,904,106
Noncontrolling interest 14,323 14,029 14,318
------ ------ ------
Total equity 5,181,979 5,184,182 4,918,424
--------- --------- ---------
Total liabilities and equity $10,663,890 $10,797,091 $10,517,899
=========== =========== ===========
Cash, short-term and long-term
investments (1) $ 1,191,733 $ 1,242,256 $ 824,197
Funded debt to capital ratio: (2)
- Gross 0.41 : 1 0.41 : 1 0.41 : 1
- Net of cash and investments 0.33 : 1 0.33 : 1 0.35 : 1
Interest coverage ratio: (3) 6.2 : 1 8.4 : 1 20.7 : 1
</pre>
<p> </p>
<pre>
(1) The December 31, 2009, September 30, 2009 and December 31, 2008
amounts include $92.5 million, $127.7 million, and $224.2 million,
respectively, in oil and gas financing receivables that are included
in long-term investments and other receivables.
</pre>
<p> </p>
<pre>
(2) The gross funded debt to capital ratio is calculated by dividing *
funded debt by (y) funded debt plus deferred tax liabilities (net of
deferred tax assets) plus capital. Funded debt is the sum of (1)
short-term borrowings, (2) the current portion of long-term debt and
(3) long-term debt. Capital is defined as shareholders' equity.
The net funded debt to capital ratio is calculated by dividing *
net funded debt by (y) net funded debt plus deferred tax liabilities
(net of deferred tax assets) plus capital. Net funded debt is
funded debt reduced by the sum of cash and cash equivalents and
short-term and long-term investments and other receivables. Both of
these ratios are used to calculate a company's leverage in relation
to its capital. Neither ratio measures operating performance or
liquidity as defined by accounting principles generally accepted in
the United States of America (GAAP) and, therefore, may not be
comparable to similarly titled measures presented by other
companies.
</pre>
<p> </p>
<pre>
(3) The interest coverage ratio is a trailing 12-month quotient of the
sum of net income (loss) attributable to Nabors, interest expense,
depreciation and amortization, depletion expense, impairments and
other charges, income tax expense (benefit) and our proportionate
share of full-cost ceiling test writedowns from our oil and gas
joint ventures less investment income (loss) divided by cash
interest expense. This ratio is a method for calculating the amount
of operating cash flows available to cover interest expense. The
interest coverage ratio is not a measure of operating performance or
liquidity defined by GAAP and may not be comparable to similarly
titled measures presented by other companies.
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
SEGMENT REPORTING
(Unaudited)
The following tables set forth certain information with respect to our
reportable segments and rig activity:
</pre>
<p> </p>
<pre>
Three Months Ended
------------------
December 31, September 30,
------------ -------------
(In thousands, except rig activity) 2009 2008 2009
---- ---- ----
Reportable segments:
Operating revenues and Earnings (losses)
from unconsolidated affiliates:
Contract Drilling: (1)
U.S. Lower 48 Land Drilling $ 230,789 $527,335 $212,004
U.S. Land Well-servicing 88,342 201,118 89,459
U.S. Offshore 29,258 66,770 25,708
Alaska 43,208 46,264 45,210
Canada 81,189 130,726 58,219
International 287,230 357,286 307,660
------- ------- -------
Subtotal Contract Drilling (2) 760,016 1,329,499 738,260
Oil and Gas (3) (4) (153,137) (206,389) 10,091
Other Operating Segments (5) (6) 96,109 173,331 89,774
Other reconciling items (7) (24,045) (50,648) (32,753)
------- ------- -------
Total $678,943 $1,245,793 $805,372
======== ========== ========
Adjusted income (loss) derived from
operating activities:
Contract Drilling: (1)
U.S. Lower 48 Land Drilling $ 48,980 $ 190,567 $ 46,382
U.S. Land Well-servicing 8,758 44,339 342
U.S. Offshore 7,117 16,282 (163)
Alaska 14,398 11,195 11,145
Canada 632 19,997 (10,448)
International 74,423 104,225 86,865
------ ------- ------
Subtotal Contract Drilling (2) 154,308 386,605 134,123
Oil and Gas (3) (4) (169,883) (217,570) (90)
Other Operating Segments (5) (6) 5,867 18,757 3,978
Other reconciling items (8) (19,435) (51,849) (25,232)
------- ------- -------
Total (29,143) 135,943 112,779
Interest expense (65,172) (50,105) (66,671)
Investment income (loss) 172 (7,278) (1,805)
(Losses) gains on sales and
retirements of
long-lived assets and other
(expense) income, net (12,196) 3,866 (10,323)
Impairments and other charges (9) (112,046) (176,123) -
-------- -------- ---
Income (loss) before income taxes $(218,385) $ (93,697) $ 33,980
========= ========== ========
Rig activity:
Rig years: (10)
U.S. Lower 48 Land Drilling 139.1 260.1 123.6
U.S. Offshore 8.6 17.9 7.8
Alaska 8.0 11.7 9.0
Canada 21.2 39.8 12.3
International (11) 85.9 121.3 97.1
---- ----- ----
Total rig years 262.8 450.8 249.8
===== ===== =====
Rig hours: (12)
U.S. Land Well-servicing 133,474 268,253 135,040
Canada Well-servicing 38,018 61,497 31,686
------ ------ ------
Total rig hours 171,492 329,750 166,726
======= ======= =======
Year Ended
----------
December 31,
------------
(In thousands, except rig activity) 2009 2008
---- ----
Reportable segments:
Operating revenues and Earnings (losses)
from unconsolidated affiliates:
Contract Drilling: (1)
U.S. Lower 48 Land Drilling $1,082,531 $1,878,441
U.S. Land Well-servicing 412,243 758,510
U.S. Offshore 157,305 252,529
Alaska 204,407 184,243
Canada 298,653 502,695
International 1,265,097 1,372,168
--------- ---------
Subtotal Contract
Drilling (2) 3,420,236 4,948,586
Oil and Gas (3) (4) (209,091) (151,465)
Other Operating Segments (5) (6) 446,282 683,186
Other reconciling items (7) (179,752) (198,245)
-------- --------
Total $3,477,675 $5,282,062
========== ==========
Adjusted income (loss) derived from
operating activities:
Contract Drilling: (1)
U.S. Lower 48 Land Drilling $ 294,679 $ 628,579
U.S. Land Well-servicing 28,950 148,626
U.S. Offshore 30,508 59,179
Alaska 62,742 52,603
Canada (7,019) 61,040
International 365,566 407,675
------- -------
Subtotal Contract
Drilling (2) 775,426 1,357,702
Oil and Gas (3) (4) (256,535) (206,490)
Other Operating Segments (5) (6) 34,120 68,572
Other reconciling items (8) (196,844) (167,831)
-------- --------
Total 356,167 1,051,953
Interest expense (264,948) (196,718)
Investment income (loss) 25,756 21,726
(Losses) gains on sales and
retirements of
long-lived assets and other
(expense) income, net (12,962) (15,027)
Impairments and other charges (9) (339,129) (176,123)
-------- --------
Income (loss) before income taxes $ (235,116) $ 685,811
========== ==========
</pre>
<p> </p>
<pre>
Rig activity:
Rig years: (10)
U.S. Lower 48 Land Drilling 149.4 247.9
U.S. Offshore 11.0 17.6
Alaska 10.0 10.9
Canada 19.7 35.5
International (11) 100.2 120.5
----- -----
Total rig years 290.3 432.4
===== =====
Rig hours: (12)
U.S. Land Well-servicing 590,878 1,090,511
Canada Well-servicing 143,824 248,032
------- -------
Total rig hours 734,702 1,338,543
======= =========
</pre>
<p> </p>
<pre>
(1) These segments include our drilling, workover and well-servicing
operations, on land and offshore.
</pre>
<p> </p>
<pre>
(2) Includes earnings (losses), net from unconsolidated affiliates,
accounted for using the equity method, of $3.0 million, $(3.9)
million, and $4.9 million for the three months ended December 31,
2009 and 2008 and September 30, 2009, respectively, and $9.7 million
and $5.8 million for the years ended December 31, 2009 and 2008,
respectively.
</pre>
<p> </p>
<pre>
(3) Represents our oil and gas exploration, development and production
operations. Includes our proportionate share of full-cost ceiling
test writedowns recorded by our oil and gas joint ventures of
$(162.1) million and $(228.3) million for the three months ended
December 31, 2009 and 2008, respectively, and $(237.1) million and
$(228.3) million for the years ended December 31, 2009 and 2008,
respectively.
</pre>
<p> </p>
<pre>
(4) Includes earnings (losses), net from unconsolidated affiliates,
accounted for using the equity method, of $(162.7) million, $(223.8)
million and $4.0 million for the three months ended December 31,
2009 and 2008 and September 30, 2009, respectively, and $(241.9)
million and $(241.4) million for the years ended December 31, 2009
and 2008, respectively.
</pre>
<p> </p>
<pre>
(5) Includes our drilling technology and top drive manufacturing,
directional drilling, rig instrumentation and software, and
construction and logistics operations.
</pre>
<p> </p>
<pre>
(6) Includes earnings (losses), net from unconsolidated affiliates,
accounted for using the equity method, of $4.1 million, $(1.6)
million and $4.5 million, for the three months ended December 31,
2009 and 2008 and September 30, 2009, respectively, and $17.5
million and $5.8 million for the years ended December 31, 2009 and
2008, respectively.
</pre>
<p> </p>
<p>(7) Represents the elimination of inter-segment transactions.</p>
<p> </p>
<pre>
(8) Represents the elimination of inter-segment transactions and
unallocated corporate expenses.
</pre>
<p> </p>
<pre>
(9) Represents impairments and other charges recorded for the three
months ended December 31, 2009 and 2008, and for the years ended
December 31, 2009 and 2008, respectively. See detail of Impairments
and other charges at "Summary of Non-Cash Charges (Non-GAAP)"
included herein as a separate schedule.
</pre>
<p> </p>
<pre>
(10) Excludes well-servicing rigs, which are measured in rig hours.
Includes our equivalent percentage ownership of rigs owned by
unconsolidated affiliates. Rig years represent a measure of the
number of equivalent rigs operating during a given period. For
example, one rig operating 182.5 days during a 365-day period
represents 0.5 rig years.
</pre>
<p> </p>
<pre>
(11) International rig years include our equivalent percentage ownership
of rigs owned by unconsolidated affiliates which totaled 2.5 years,
3.1 years and 2.5 years during the three months ended December 31,
2009 and 2008 and September 30, 2009, respectively, and 2.5 years
and 3.5 years during the years ended December 31, 2009 and 2008,
respectively.
</pre>
<p> </p>
<pre>
(12) Rig hours represents the number of hours that our well-servicing rig
fleet operated during the period.
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSSES) PER SHARE
(Unaudited)
A reconciliation of the numerators and denominators of the basic and
diluted earnings (losses) per share computations is as follows:
</pre>
<p> </p>
<pre>
Three Months Ended
------------------
December 31, September 30,
(In thousands, except per share ------------ -------------
amounts) 2009 2008 2009
---- ---- ----
Net income (loss) attributable
to Nabors (numerator):
Net income (loss) attributable to
Nabors - basic $(47,260) $(106,703) $29,530
Add interest expense on
assumed conversion of our
zero coupon convertible/
exchangeable senior
debentures/notes,
net of tax:
0.94% senior exchangeable notes
due 2011 (1) - - -
Zero coupon convertible senior
debentures due 2021 (2) - - -
Zero coupon exchangeable
notes due 2023 (3) - - -
--- --- ---
Adjusted net income (loss)
attributable to Nabors - diluted $(47,260) $(106,703) $29,530
-------- --------- -------
Earnings (losses) per
Nabors share:
Basic $ (.17) $ (.38) $ .10
-------- --------- --------
Diluted $ (.17) $ (.38) $ .10
-------- --------- --------
Shares (denominator):
Weighted-average number
of shares outstanding-basic (4) 283,854 283,081 283,197
Net effect of dilutive stock
options, warrants and restricted
stock awards based on the
if-converted method - - 4,210
Assumed conversion of our
zero coupon convertible/
exchangeable senior
debentures/notes:
0.94% senior exchangeable
notes due 2011 (1) - - -
Zero coupon convertible
senior debentures
due 2021 (2) - - -
Zero coupon exchangeable
notes due 2023 (3) - - -
--- --- ---
Weighted-average number of
shares outstanding - diluted 283,854 283,081 287,407
------- ------- -------
Year Ended
----------
December 31,
(In thousands, except per share ------------
amounts) 2009 2008
---- ----
Net income (loss) attributable
to Nabors (numerator):
Net income (loss)
attributable to
Nabors - basic $(85,546) $475,737
Add interest expense on assumed
conversion of our zero coupon
convertible/exchangeable senior
debentures/notes, net of tax:
0.94% senior exchangeable
notes due 2011 (1) - -
Zero coupon convertible
senior debentures
due 2021 (2) - -
Zero coupon exchangeable
notes due 2023 (3) - -
--- ---
Adjusted net income (loss)
attributable to Nabors - diluted $(85,546) $475,737
-------- --------
Earnings (losses) per
Nabors share:
Basic $ (.30) $ 1.69
-------- -------
Diluted $ (.30) $ 1.65
-------- --------
Shares (denominator):
Weighted-average number
of shares outstanding-basic (4) 283,326 281,622
Net effect of dilutive
stock options, warrants
and restricted
stock awards based
on the if-converted method - 5,332
Assumed conversion of our
zero coupon
convertible/exchangeable
senior debentures/notes:
0.94% senior exchangeable
notes due 2011 (1) - -
Zero coupon convertible
senior debentures
due 2021 (2) - -
Zero coupon exchangeable
notes due 2023 (3) - 1,282
--- -----
Weighted-average number
of shares outstanding - diluted 283,326 288,236
------- -------
</pre>
<p> </p>
<pre>
(1) Diluted earnings (losses) per share for the three months ended
December 31, 2009 and 2008 and September 30, 2009, and for the years
ended December 31, 2009 and 2008 exclude any incremental shares
issuable upon exchange of the 0.94% senior exchangeable notes due
2011. During 2008 and 2009 we cumulatively purchased $1.1 billion
par value of these notes in the open market, leaving approximately
$1.7 billion par value outstanding. The number of shares that we
would be required to issue upon exchange consists of only the
incremental shares that would be issued above the principal amount
of the notes, as we are required to pay cash up to the principal
amount of the notes exchanged. We would issue an incremental number
of shares only upon exchange of these notes. Such shares are
included in the calculation of the weighted-average number of shares
outstanding in our diluted earnings per share calculation only when
our stock price exceeds $45.83 as of the last trading day of the
quarter and the average price of our shares for the ten consecutive
trading days beginning on the third business day after the last
trading day of the quarter exceeds $45.83, which did not occur
during any period for the three months ended December 31, 2009 and
2008 and September 30, 2009, and for the years ended December 31,
2009 and 2008.
</pre>
<p> </p>
<pre>
(2) In July 2008 Nabors Delaware paid $60.6 million in cash to redeem
the notes, which equaled the issue price of $50.4 million plus
accrued original issue discount of $10.2 million. No common shares
were issued as part of the redemption of the zero coupon convertible
senior debentures.
</pre>
<p> </p>
<pre>
(3) In June and July 2008 Nabors Delaware paid cash of $171.8 million
and $528.2 million, respectively, to redeem all of the notes. In
addition to the $700 million in cash, we issued 5.25 million common
shares with a fair value of $249.8 million, which equated to the
excess of the exchange value of the notes over their principal
amount. Because the conversion was completed during 2008, diluted
earnings per share for the year ended December 31, 2008 reflect the
conversion of the zero coupon senior exchangeable notes due 2023
which included the effect of the 5.25 million shares in the
calculation of the weighted-average number of basic shares
outstanding.
</pre>
<p> </p>
<pre>
(4) On July 31, 2009, the exchangeable shares of Nabors (Canada)
Exchangeco Inc. ("Nabors Exchangeco") were exchanged for Nabors'
common shares on a one-for-one basis. Basic shares outstanding
includes the following weighted-average number of common shares and
restricted stock of Nabors and weighted-average number of
exchangeable shares of Nabors Exchangeco, respectively: 283.9
million shares cumulatively for the three months ended December 31,
2009; 283.0 million and .1 million shares for the three months ended
December 31, 2008; 283.1 million and .1 million shares for the three
months ended September 30, 2009; 283.2 million and .1 million shares
for the year ended December 31, 2009; and 281.5 million and .1
million shares for the year ended December 31, 2008.
</pre>
<p> </p>
<p> </p>
<pre>
For all periods presented, the computation of diluted earnings (losses)
per Nabors' share excludes outstanding stock options and warrants with
exercise prices greater than the average market price of Nabors' common
shares, because their inclusion would be anti-dilutive and because they
are not considered participating securities. The average number of options
and warrants that were excluded from diluted earnings (losses) per share
that would potentially dilute earnings (losses) per share in the future
were 34,197,583 and 26,102,054 shares during the three months ended
December 31, 2009 and 2008, respectively; 16,595,790 shares during the
three months ended September 30, 2009; and 34,113,887 and 7,416,865 shares
during the years ended December 31, 2009 and 2008, respectively. In any
period during which the average market price of Nabors' common shares
exceeds the exercise prices of these stock options and warrants, such
stock options and warrants will be included in our diluted earnings
(losses) per share computation using the if-converted method of
accounting. Restricted stock will be included in our basic and diluted
earnings (losses) per share computation using the two-class method of
accounting in all periods because such stock is considered participating
securities.
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
SUMMARY OF NON-CASH CHARGES (NON-GAAP)
(Unaudited)
Three Months Ended
------------------
December 31, September 30,
------------ -------------
(In thousands) 2009 2008 2009
---- ---- ----
Equity method oil and gas
joint venture impairments $(162,121) $(228,252) $ -
Goodwill and intangible
asset impairments - (154,586) -
Impairments of long-lived
assets to be disposed
of other than
by sale - - -
Stock compensation charge - - -
Impairments of oil and gas-
related assets (93,381) (21,537) -
Other-than-temporary
impairments on securities (18,665) - -
------- --- ---
Total charges before
income taxes (274,167) (404,375) -
Tax benefit (expense) 175,383 (1) 89,680 (1) (12,997) (1)
------- ------ ------
Total charges after
income taxes $ (98,784) $(314,695) $(12,997)
========= ========= ========
Year Ended
----------
December 31,
------------
(In thousands) 2009 2008
---- ----
Equity method oil and gas
joint venture
impairments $(245,416) $(228,252)
Goodwill and intangible
asset impairments (14,689) (154,586)
Impairments of long-lived
assets to be disposed of
other than
by sale (64,229) -
Stock compensation charge (62,114) -
Impairments of oil and gas-
related assets (205,897) (21,537)
Other-than-temporary
impairments on securities (54,314) -
------- ---
Total charges before
income taxes (646,659) (404,375)
Tax benefit (expense) 191,734 89,680
------- ------
Total charges after
income taxes $(454,925) $(314,695)
========= =========
(1) This represents the difference between the tax (expense) benefit
recorded during the period in accordance with the interim period tax
allocation rules and the amount of tax (expense) benefit that would
have resulted from the application of the interim period tax
allocation rules if the non-cash charges were excluded.
For further information: Dennis A. Smith, Director of Corporate Development of Nabors Corporate Services, Inc., +1-281-775-8038, or Investors, Nabors Industries Ltd., +1-441-292-1510, [email protected]
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