Nabors Industries Ltd. · NYSE:NBR
Nabors Industries — 2011 Bank of America Merrill Lynch Global Energy Conference
40 slides from Nabors Industries's conference presentation, Nov 15, 2011
Slide 1: 2011 Bank of America Merrill Lynch Global Energy Conference
November 15, 2011 Presenter: Anthony G. Petrello Deputy Chairman, President & CEO 2011 Bank of America Merrill Lynch Global Energy Conference
Slide 2: Forward Looking Statements
Forward Looking Statements We often discuss expectations regarding our markets, demand for our products and services, and our future performance in our annual and quarterly reports, press releases, and other written and oral statements. Such statements, including statements in this document incorpor
Slide 3: Principles Upon Which Nabors Was Built
Maintain a strong and flexible balance sheet Take advantage of opportunities as they arise Leverage our global infrastructure Achieve superior HSE performance Achieve superior operational performance Focus on the customer Achieve returns well above our cost of capital Principles Upon Which Nabors Wa
Slide 4: Nabors Industries Then & Now
Nabors Industries Then & Now First Year 1987 Tony Arrives 1991 Prior Highs 2008 (1) EOY 2011 Est. (2) Global Revenues $29MM $240MM $5.3B $6.1B Net Income ($21MM) $27MM $551.2MM $527.8MM Worldwide Rig Count 38 113 1,344 1,295 Worldwide Employment 320 3,000 26,360 27,250 Market Capitalization $35MM $1
Slide 5: A Great Platform
A Great Platform An unparalleled asset base Established worldwide infrastructure Supply chain advantages Access to virtually all major worldwide markets Customer relationships with most major players Ideal corporate structure for efficient access to capital Deep bench of experienced senior managemen
Slide 6: Nabors Global Infrastructure
Nabors Global Infrastructure Largest portfolio of premium assets Actively Marketed Rigs Only As of September 30, 2011 DRILLING INSTRUMENTATION TOP DRIVE MANUFACTURING 749 LAND WORKOVER RIGS 491 LAND DRILLING RIGS 12 JACKUPS 7 Drilling 5 Workover 4 BARGE RIGS 39 PLATFORM RIGS 25 Workover/Re-Drilling
Slide 7: Nabors Global AC Rig Fleet
Nabors Global AC Rig Fleet New build rigs for US lower 48 land are only part of the Nabors story 11/11/11 To Be Delivered Total Alaska Drilling 3 0 3 US Lower 48 Land Drilling 116 31 147 Canada Drilling 23* 3 26 International Drilling 34 2 36 US Offshore Drilling 4 2 6 Total NBR 180 38 218 * Include
Slide 8: Global Fleet - Cash Flow Equivalent to US Land Rigs
Global Fleet - Cash Flow Equivalent to US Land Rigs More to Nabors than just U.S. land drilling Actual 3Q 2011 Rig Years U.S. Lower 48 Equivalent Rig Count (1) Alaska 4.7 17 U.S. Lower 48 201.8 202 Canada 41.8 58 International 105.3 125 Offshore GOM 10.8 16 Well Servicing - 67 Canrig - 47 SWSI 17 Cr
Slide 9: Our Business Lines: An Overview
Our Business Lines: An Overview Operating Segments by Line of Business Drilling Rigs and Services • US Lower 48 • GOM Offshore • Canada • Ryan • Alaska • Peak • International • Canrig Well Site and Production Services • US Workover and Well Servicing • Canadian Workover and Well Servicing • Pressure
Slide 10: Fleet Status: Activity Improving Across all Operations
Drilling High 2008 Avg. High 2008 Avg. Low 3Q09 Avg. Now 3Q11 Avg. Exp. 4Q11 Alaska 11 11 9 5 5 US 48 Drilling 248 248 124 202 218 GOM Offshore 18 18 8 11 12 Canada 36 36 12 42 44 International 120 120 97 105 116 Total Drilling 433 433 250 365 395 Well Servicing (hrs/cal. day) Well Servicing (hrs/ca
Slide 11: Accelerating Operating Cash Flow
Our Business Lines: An Overview Accelerating Operating Cash Flow 3Q Consolidated Run Rate at Prior Highs and Increasing FY 2008 TTM 3Q11 Annualized US Lower 48 $839 $648 $713 US Well Servicing 214 136 175 US Offshore 102 28 50 Alaska 74 73 39 Canada 128 153 167 International 580 438 390 Pressure Pum
Slide 12: Priority Areas for Review and Action
Re-establish balance sheet flexibility Evaluate each business line for strategic fit, execution effectiveness and return hurdles Priority Areas for Review and Action
Slide 13: Re-Establish Balance Sheet Flexibility: Net Debt Reduction
Re-Establish Balance Sheet Flexibility Increased Focus on Balance Sheet Management and Net Debt Reduction Balance Sheet Data as of September 30, 2011 ($ Millions) ($ Millions) ($ Millions) ($ Millions) Cash & Securities 436 436 436 436 436 Accounts Receivable 1,398 1,398 1,398 1,398 1,398 Working Ca
Slide 14: Re-Establish Balance Sheet Flexibility: Liquidity
Re-Establish Balance Sheet Flexibility Liquidity Current liquidity approximately $1.0 billion Expect 2012 OCF to fund all capital expenditures, redeem current debt and provide significant free cash flow Total debt Weighted average coupon is 5.8% Interest coverage ratio approximately 8 to 1 Term debt
Slide 15: Assured Cash Flow is Relatively Constant
Re-Establish Balance Sheet Flexibility Assured Cash Flow is Relatively Constant Continued Term Contract Emphasis Note: Value of contracts in force as of September 30, 2011, assumes no incremental contracts or renewal of expiring contracts
Slide 16: De-levering
Re-Establish Balance Sheet Flexibility De-levering Increase EBITDA to reduce net debt More discipline and higher hurdles for new projects Monetize non-performing and non-strategic assets
Slide 17: Evaluate Each Business Line: Drilling Rigs & Services
Evaluate Each Business Line Drilling Rigs & Services A Closer Look
Slide 18: US Lower Land Drilling: Total Working Rigs
Drilling Rigs & Services US Lower 48 Land Drilling: Total Working Rigs: 219 now ? 250 w/ new builds 106 ? 127 113 ? 123
Slide 19: Shale Plays and Basins
Drilling Rigs & Services Shale Plays and Basins Nabors Rigs Including New Builds Frac Crews Marcellus 14 14 2 Haynesville/Tuscaloosa 32 35 2 Permian 26 26 2 Barnett 3 3 2 Eagle Ford 36 43 3 Woodford 3 3 1 Fayetteville 1 1 1 Granite Wash 11 11 0 Niobrara 4 4 1 Uinta 2 2 1 Bakken / Three Forks 49 70 4
Slide 20: NDUSA Rig Fleet
Drilling Rigs & Services NDUSA Rig Fleet NDUSA Rig Fleet AC Rigs @ 11/11/11 116 SCR Upgraded 65 SCR 44 Mechanical 41 Current Total 266 AC Rigs still to be deployed 31 Total 297 Expected % AC and AC Equivalent 71% US Lower 48 Land Drilling: Premium Fleet Makeup
Slide 21: US Lower Land Drilling
Drilling Rigs & Services US Lower 48 Land Drilling: YTD EBITDA: $496MM; YTD EBIT: $284MM As of 11/11/11, 219 rigs on revenue Full utilization of PACE(r) rigs strengthens market for SCR and Mechanical rigs Leading edge pricing continues to move up slowly as contracts renew Ongoing convergence of aver
Slide 22: International
Drilling Rigs & Services International: YTD EBITDA: $301.5MM; YTD EBIT: $100.3MM 1Q12 should reflect the bottom 4Q11 and 1Q12 impacted by delays in contract awards, start- ups, rig upgrades, and jackup dry docking 3Q rig count 105, expected 130 by EOY2012 after incremental start ups in Saudi, Iraq,
Slide 23: Canada
Drilling Rigs & Services Canada: YTD EBITDA: $117MM; YTD EBIT: $58MM 3Q - Strong post break-up recovery at $21.6MM EBIT Cardium & NE British Columbia shales driving increased activity Significant upside remaining as 2011 projected EBIT only +/-40% of 2006
Slide 24: Alaska
Drilling Rigs & Services Alaska: YTD EBITDA: $50.5MM; YTD EBIT: $22.3MM Strong 1Q & 2Q 2012 due to more active exploration season Approximately 75% of 2011/2012 exploration work to be performed by Nabors Reduced oil & gas tax progressivity should spur activity Effort to attract new players Nabors' o
Slide 25: US Offshore
Drilling Rigs & Services US Offshore: YTD EBITDA: $24.9MM; YTD EBIT: $(2.6MM) Returned to profitability in 3Q at $2.5MM EBIT Six deepwater platform rigs back to work Per IADC, permitting approval rate is 85% of pre-Macondo level, average days to issuance increased from 36 to 131 Canrig: Maintaining
Slide 26: Evaluate Each Business Line: Wellsite & Production Services
Evaluate Each Business Line Wellsite & Production Services
Slide 27: US Well Servicing: Operating Facilities
Wellsite & Production Services Operating Facilities Operating Facilities District District California 16 Mid-Continent 12 Rocky Mountain 16 Northeast 9 Southeast 24 Western 21 Total 98 US Well Servicing:
Slide 28: US Well Servicing
Wellsite & Production Services US Well Servicing: YTD EBITDA: $108MM; YTD EBIT: $50.5MM 4Q & 1Q likely to be flat due to holidays and weather Pricing steady with modest net increases as costs are increasing 1000 new frac tanks in service, 500 on order 150 new fluid hauling units now in service Signi
Slide 29: US Pressure Pumping: Building a Strong Geographic Presence
Wellsite & Production Services Wellsite & Production Services US Pressure Pumping: Building a Strong Geographic Presence
Slide 30: US Pressure Pumping: Good Competitive Positions - Spread Counts
Wellsite & Production Services Key Market Total HAL SLB BHI SWS Appalachia 40 6 5 5 3 going to 5 Eagle Ford 50 7 7 4 3 West Texas 80 17 8 14 5 Rockies-Bakken 48 18 9 7 5 going to 7 Rockies 33 17 1 4 4 going to 5 Total 65 30 34 20 going to 25 US Pressure Pumping: Good Competitive Positions - Spread C
Slide 31: US Pressure Pumping
Wellsite & Production Services US Pressure Pumping: YTD EBITDA: $228.6MM; YTD EBIT: $152.7MM Increasingly competitive in some regions Capacity balance pushing to the right Currently 20 crews (745k frac HHP) ? 25 (855k frac HHP) by 2Q12 Current focus on securing term contracts (14 total, 10 active) E
Slide 32: US Pressure Pumping: Opportunities
Wellsite & Production Services US Pressure Pumping: Opportunities Supply chain integration into Nabors Material warehousing and storage economies Margin improvement Sand hauling and logistics capture of revenue Water management
Slide 33: Oil & Gas: Expeditiously monetize in an orderly manner
Evaluate Each Business Line Oil & Gas: Expeditiously monetize in an orderly and optimal manner Cash Invested Proceeds to Date Net Cash Position $2,100MM $845MM $(1,255)MM Wholly Owned Net Acreage: (000's Acres) Wholly Owned Net Acreage: (000's Acres) Wholly Owned Net Acreage: (000's Acres) Wholly Ow
Slide 34: Summary
Summary Great opportunity for Nabors and its shareholders Unequalled global asset quality and infrastructure Virtually every segment improving with good longer-term outlook Numerous attractive growth opportunities Urgent action items Orderly monetization of Oil & Gas assets Optimize execution in cor
Slide 35: Auxiliary Information
Auxiliary Information (@) nae0ns mousrmies ro.
Slide 36: US Lower Land Drilling Term Contracts in Force at 9/30/11
US Lower 48 Land Drilling Term Contracts in Force at 9/30/11 Represents the quarter end number of contracts in force with no incremental contract awards in the future. Number excludes lump sum contract terminations to date, but includes contracts where operator is keeping rig on standby mode. 3Q11 4
Slide 37: Margins and Activities
Margins and Activities (1) Margin = gross margin per rig per day for the period. Gross margin is computed by subtracting direct costs from operating revenues for the period. 3Q11 3Q11 2Q11 2Q11 3Q10 3Q10 Margin (1) Rig Yrs Margin (1) Rig Yrs Margin (1) Rig Yrs US Lower 48 $10,176 201.8 $10,201 194.2
Slide 38: Quarterly Adjusted Income (Loss) Derived from Operating Activities
Quarterly Adjusted Income (Loss) Derived from Operating Activities ($000's) 3Q11 2Q11 3Q10 US Lower 48 $104,877 $99,231 $70,452 Nabors Well Services 22,839 16,526 9,049 US Offshore 2,457 (1,059) (1,090) Alaska 3,021 8,288 14,299 Canada 21,604 (2,512) 1,013 International 29,015 35,851 64,379 Pressure
Slide 39: Non-GAAP Financial Information
Non-GAAP Financial Information Within the preceding slides in this presentation, we present, both historically and on a forward-looking basis, our adjusted income (loss) derived from operating activities, which is a "non-GAAP" financial measure under Regulation G. The components of adjusted income (
Slide 40: Non-GAAP Financial Information (continued)
Non-GAAP Financial Information (continued) The following table provides a reconciliation of adjusted income (loss) derived from operating activities for our reportable segments to income (loss) from continuing operations before income taxes for the three months ended September 30, 2011, June 30, 201
Nabors Industries — 2011 Bank of America Merrill Lynch Global Energy Conference on 6ix