Nabors Industries Q2 2025 Earnings Report

Nabors Industries EPS Results

• Actual EPS: -$2.71
• Consensus EPS: -$2.05
• Beat/Miss: Missed by -$0.66
• One Year Ago EPS: -$4.29

Nabors Industries Revenue Results

• Actual Revenue: $832.79 million
• Expected Revenue: $857.98 million
• Beat/Miss: Missed by -$25.19 million
• YoY Revenue Growth: +12.10%

Nabors Industries Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 11:00AM ET

Nabors Industries (NYSE:NBR) provides drilling and drilling-related services for land-based and offshore oil and natural gas wells in the United States and internationally. The company operates through four segments: U.S. Drilling, International Drilling, Drilling Solutions, and Rig Technologies. It provides tubular running services, including casing and tubing running, and torque monitoring; managed pressure drilling services; and drilling-bit steering systems and rig instrumentation software. The company also offers drilling systems comprising ROCKit, a directional steering control system; SmartNAV, a collaborative guidance and advisory platform; SmartSLIDE, a directional steering control system; and RigCLOUD, a digital infrastructure to integrate applications to deliver real-time insight into operations across the rig fleet. In addition, it operates a fleet of land-based drilling rigs and marketed platforms rigs; manufactures and sells top drives, catwalks, wrenches, drawworks, and other drilling related equipment, such as robotic systems and downhole tools; and provides aftermarket sales and services for the installed base of its equipment. Nabors Industries Ltd. was founded in 1952 and is based in Hamilton, Bermuda.

Nabors Industries Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted EBITDA reached $248 million in Q2, matching company expectations and reflecting strength across U.S. drilling and Parker operations.
• Positive Sentiment: Integration of the Parker Wellbore acquisition delivered a full‐quarter EBITDA contribution and remains on track to achieve $40 million in cost synergies for 2025.
• Negative Sentiment: U.S. Lower 48 business saw average rig count rise to 62.4 in Q2, but leading‐edge day rates fell into the low $30 000s, pressuring daily rig margins, with further Q3 pricing pressure anticipated.
• Positive Sentiment: The SANAD joint venture in Saudi Arabia secured awards for five additional rigs—bringing its newbuild pipeline to 20 units—and plans deployments through early 2027 under Saudi Aramco’s Vision 2030 program.
• Positive Sentiment: Free cash flow improved to $41 million in Q2, and full‐year 2025 capital expenditures were reduced to $700–710 million, strengthening the company’s ability to focus on debt reduction.

Presentation

[Operator]

Good day, and welcome to the Nabors Industries Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I would now like to turn the conference over to William Conroy, Vice President, Corporate Development and Investor Relations. Please go ahead.

[William Conroy, Vice President of Corporate Development & Investor Relations at Nabors Industries]

Good morning, everyone. Thank you for joining Nabors' second quarter twenty twenty five 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 Nabors to perform in these markets. In support of these remarks, a slide deck is available, both as a download within the webcast and in the Investor Relations section of nabors.com. Instructions for the replay of this call are posted on the website as well.

[William Conroy, Vice President of Corporate Development & Investor Relations at Nabors Industries]

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 Nabors 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 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.

[William Conroy, Vice President of Corporate Development & Investor Relations at Nabors Industries]

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.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Good morning. Thank you for joining us today as we review our second quarter results. We will also comment on the Parker wellbore business that we acquired in March and on the current market environment. The second quarter had several positive developments.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Adjusted EBITDA totaled $248,000,000 This performance was in line with our expectations. It includes a full quarter contribution from the Parker operations, improved results in our U. S. Drilling business and four rig deployments in The Middle East. The Parker businesses performed well.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

They made a meaningful contribution to our overall results and we are on track to achieve our $40,000,000 cost synergy target for 2025. I also want to mention our legacy Neighbor's business excluding Parker improved in the quarter. This performance speaks to the strength of our portfolio. Next, I'll address the broader market environment. A number of factors currently influence oil.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Global oil demand remains strong and growing. U. S. Trade policy, specifically tariffs appears to be gaining clarity. At the same time, production is increasing in certain countries, particularly in offshore reservoirs.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

And U. S. Production, especially from unconventionals continues to benefit from efficiency gains. In sum, the global oil market appears stable. This backdrop is supportive.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Along with our presence in most major producing countries, we are well positioned to capitalize on opportunities across the globe. As for natural gas, that market has proved resilient. In part, this is driven by increasing LNG exports. The gas directed industry rig count in the Lower 48 has increased thus far in 2025. Our own rig count in the gas basins has grown since February.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Natural gas activity in The U. S. Appears poised for further recovery over the upcoming quarters. We are prepared to act quickly to stand up rigs in that event. Next, I will elaborate on our results.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

In the second quarter, The U. S. Offshore and Alaska drilling operations in particular demonstrated the value of our differentiated businesses. Together, these contributed more than $28,000,000 EBITDA in the second quarter. Nabors Drilling Solutions gross profit margin reached 53%.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Margins increased most of the NDS product lines. EBITDA from NDS now accounts for approximately 25% of our total operational EBITDA. Our own Lower 48 average rig count increased by nearly two rigs. Activity in natural gas basins continued to improve. We entered the second quarter at 63 above our 61 rig average for the first quarter.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

We held at 63 to 64 until mid June. We then finished the quarter at 60. Now our rig count stands at 59. The Lower 48 market continues to feel some pressure from activity reductions in oil focused basins as clients rationalize their operations. Next, I'll discuss the international markets.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Let me start with Saudi Arabia. A significant transformation is underway in this market, one that has accelerated in the past two years. The Kingdom has progressively shifted its drilling focus from oil to natural gas. Since the beginning of 2024, in line with those objectives, a substantial number of land rigs have been idled. The majority of those rigs were drilling for oil.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Over the same time period, the equivalent of half that number has started operating. These are primarily in deep gas and unconventional gas basins. These actions have taken the land rig count from two zero seven to 178 over this time. During this period, own rig count has increased by four rigs. In the second quarter, Santa delivered strong results as two more newbuilds were deployed.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Looking ahead, we are pleased to announce Santa received awards for five more rigs. With the award of this fourth tranche, the newbuild deployment schedule calls for two more in 2025, four in 2026 and two in 2027. Elsewhere in the Eastern Hemisphere, we see industry activity improving. We've identified more than 25 opportunities to add rigs. Markets where we currently operate account for approximately 40% of this total.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

This total opportunity set is healthy. The addition of that number of rigs would support both industry utilization and pricing. In Latin America, activity in Mexico remains uncertain. We currently have three offshore platform rigs working. Our fourth rig reached the end of its contract.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Our customer has expressed interest in re contracting the rig. With their specifications and capabilities, our rigs are ideally suited for the customer's offshore platform activity. They have a modular design, which enables rapid moves between platforms. This provides us with a significant competitive advantage. However, with our customers' current initiatives to reduce costs, there could be some exposure to our rig count.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Our receivables collections in Mexico were below our target for the quarter. The Mexican government recently announced a structured transaction designed to support our customers vendor payments. We are encouraged by this development and anticipate progress during the third quarter. In Colombia, we now have seven rigs working following the previously announced release of one rig. The rig should be re contracted in the third quarter with another customer.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

In Argentina, one of our clients reduced its activity impacting one of our rigs at the end of the second quarter. That rig has been committed to another customer with an early fourth quarter start. At the same time, we have two more rigs preparing to start in the Vaca Muerta Basin for the same customer, one in the fourth quarter and the second in early next year. These deployments bring our rig count in Argentina to 13 in early twenty twenty six. We see a number of opportunities to add rigs in Latin America.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

These are primarily in both Argentina and Colombia. Now let me comment on The U. S. Market. The Baker Hughes weekly Lower 48 rig count declined by 7% from the March through the June.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

As this overall rig count declined, we noted a small shift in mix towards larger operators. Our own mix in this market is approximately 80% public and 20% private. Operator consolidation continues to impact drilling activity predominantly in oil basins. While the pace of merger announcements has slowed, the activity rationalization process takes time. That continued through the first half.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Once again, we surveyed the expected drilling activity of the largest Lower forty eight operators. This group accounted for approximately 44% of the Lower forty eight industry's working rig count at the end of the quarter. This most recent iteration indicates a slight decline in the group's rig count through the end of the year. 70% of the operators expect no change in activity. The rest are a mix of up and down.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

The expected aggregate change for the group in total is down around 1%. The pace of decline in Lower 48 rig count for the industry has diminished. We see stability in our own rig count through the remainder of the year. Now, I will make some comments on the key drivers of our results. I'll start with our international drilling business.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

This segment is a core contributor to our long term success. Currently, are deploying previously awarded rigs. We started five in The Middle East since the beginning of the second quarter. Several attractive markets are growing. Our advanced technology gives us an advantage as we tender rigs.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Importantly, we are able to propose currently idle assets. This is a capital efficient path to growth. Next, I'll highlight the recent developments in our international drilling business. First Kuwait, this is a very important market. It offers opportunities for the highly capable rigs in our fleet.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

In the second quarter, we deployed two of our three previously awarded units on multiyear contracts. Early this quarter, we deployed the third. These additions should help fuel the sequential EBITDA growth we expect in our International segment. Second, Saudi Arabia. Our SANAD joint venture deployed two newbuild rigs in the second quarter.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

These are the eleventh and twelfth of the newbuild program. The total program calls for 50 rigs over ten years. SANAD is on track to deploy the next two builds before the 2025. Also in Saudi Arabia, Sanna has been awarded the next tranche of five rigs. Deployment of these rigs is scheduled to begin in 2026 with the final one starting in early twenty twenty seven.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

This tranche will take the number of newbuilds to 20. Let me add a few more remarks regarding Sanit. The newbuild program is a unique opportunity in the global land drilling industry. It was a key factor in our decision to pursue the opportunity to partner with Saudi Aramco ten years ago. The addition of new build rigs creates an embedded growth trajectory for several years to come.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Those rigs have ten years expected initial utilization. That visibility is unmatched in our industry. With this robust anticipated growth, Sanford shareholders are committed to realizing the value that is building in the joint venture. Now I'll discuss our performance in The U. S.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

We are the only drilling contractor with operations in all three of the major markets in The U. S, the Lower 48, the Gulf Of America and Alaska. Our offshore and Alaska businesses combined contributed nearly 30% of our U. S. Adjusted EBITDA.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

These businesses benefited from the addition of assets from Parker Wellbore. In Alaska, we now have seven rigs working including two units that came from Parker. Last year at this time, we had four rigs running. This market is improving. Future large projects may strengthen the market even further.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

As expected, Lower 48 daily rig margins in the second quarter declined. Rigs continue to recontract at leading edge day rates below the fleet average. However, rig count increased more than offsetting the impact from margins. Looking to the third quarter, we expect some continued pressure on pricing. In this environment, we will continue our efforts to ensure that our operational expenses remain under control.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

We will also align our support structure and capital expenditures to our activity. Next, let me discuss our technology and innovation. Second quarter results for Drilling Solutions reflect the contribution of a full quarter from the Parker operations. Gross margin for this segment was 53%. The improvement over the first quarter was broad spread across most of the NDS product lines.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Quail Tools is now the largest revenue contributor in the NDS portfolio. I want to highlight Quail's Lower 48 penetration in the second quarter. Running counter to the overall market, Quail added rigs in the second quarter. It has added even more early in the third quarter. I'll finish with a comment on NES' geographical mix.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

In the second quarter, international operations accounted for nearly 40% of the segment total. On a comparable basis, including the Parker operations for the full first quarter, NDS international revenue increased sequentially by 8%. This result demonstrates the growing demand for NDS' advanced technology in markets around the globe. Next, let me make some comments on our capital structure. Our highest priority remains the reduction of our debt.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

During the second quarter, we repurchased approximately $14,000,000 face value of notes at a significant discount. 2025, we expect to generate free cash flow. We intend to allocate that towards debt reduction. Before turning the call over to William for his review of our results and outlook, I would like to take a moment to acknowledge his many contributions to Nabors. William joined us in 2014, just before the sharp downturn that began later that year.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Through his leadership and financial discipline, we significantly reduced net debt during that challenging time. As the market recovered, he was instrumental in the formation of our Sanna joint venture, an important milestone for our company. During the unprecedented disruption of COVID, William once again demonstrated his leadership. We successfully navigated a difficult period that forced several companies in our industry to restructure. In summary, William has helped Nabors steer through some of the most challenging times.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

We have benefited from his many contributions and we wish him all the best as he moves into the next phase of his career. Now, let me turn the call over to William, who will discuss our financial results.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Thank you for those kind words, Tony. Good morning, everyone, and thank you for joining us today. The current market backdrop merits a few comments, as macroeconomic uncertainty remains a key theme. Financial markets continue to digest the impact of the current administration's approach to foreign trade and the ongoing debate between treasury and the Fed.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Geopolitical tensions are also affecting the capital markets. Nonetheless, more recent favorable trends in employment growth, inflation and progress on the trade front have had a positive impact on credit spreads. Although these spreads are still well above the levels we saw earlier in the year, the recent improvement is encouraging. If inflation remains tame and more tariff CDs are signed, we would expect some interest rate reductions by the Fed and a further compression of credit spreads over the balance of the year. These trends should benefit the cost of our upcoming refinancings later this year.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Despite the current investor concerns, global energy demand remains resilient and operator sentiment is largely constructive, particularly in regions focused on natural gas. In our U. S. Lower 48 business, we increased our average rig count by two rigs over the last quarter, supported by gas focused programs in the Appalachian And Haynesville Basins. This trend of increased drilling for natural gas should continue.

[William Restrepo, Chief Financial Officer at Nabors Industries]

On the other hand, Lower 48 activity in predominantly oil basins remains sluggish. Although contract turnover driven by earlier M and A activity is returning to more normal levels and oil prices have improved from recent lows, we don't believe this will be enough to drive oil focused activity higher during the remainder of the year. However, overall rig count for the Lower 48 has stabilized over the last two months and pricing remains resilient. This environment gives us confidence about our expected pace of cash flow generation and debt reduction during the balance of 2025. Overall international activity in the markets where we operate fell somewhat as our client in Saudi Arabia continued to reduce its onshore drilling, particularly in oil basins and our customer in Mexico continued to cut back on its investment programs.

[William Restrepo, Chief Financial Officer at Nabors Industries]

In Argentina, although market activity remains strong, some customers have slowed down drilling programs as they digest material asset acquisitions. Nabors average international rig count increased by one rig, mainly driven by additional new builds in Saudi Arabia and reactivated rigs in Kuwait. These gains were partially offset by a previously announced market exit and by the conclusion of our contract in Papua New Guinea. One of our rigs in Mexico reached the end of its contract. We're currently in discussions on the contract extension.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Before discussing our financial results, I will provide a brief update on our recent acquisition of Parker Wellbore. The second quarter marks the first full period of consolidated results, adding seventy one days of Parker operations compared to the prior quarter. We have made excellent progress on the integration front and are well on track to achieving approximately $40,000,000 in post closing synergies by the end of the year, somewhat above our initial target. I'm also pleased to report that the acquired business contributed meaningfully to both revenue and EBITDA during the quarter. Parker's performance exceeded our expectations for this quarter.

[William Restrepo, Chief Financial Officer at Nabors Industries]

We also expect its annual results to be higher than the level we previously shared with our investors. As I walk through the results, I will highlight areas where Parker's operations had a notable impact. I'll now cover our financial results for the second quarter, provide updates on our cash flow, discuss debt refinancing and share our outlook for the third quarter. Revenue from operations for the second quarter totaled $833,000,000 compared to $736,000,000 in the prior quarter, an increase of $97,000,000 or 13%, primarily reflecting the full quarter impact of the Parker acquisition. Our legacy drilling rig segments experienced an overall revenue decrease, reflecting rig count declines in certain international markets, partly compensated by revenue increases in Kuwait and The U. S.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Nonetheless, their margins increased in the quarter. U. S. Drilling revenue for the quarter was $255,000,000 representing a sequential increase of $25,000,000 or 11%. The improvement reflects both stronger organic activity and a positive contribution from the Parker acquisition.

[William Restrepo, Chief Financial Officer at Nabors Industries]

The full quarter impact for Parker rigs in Alaska and offshore accounted for approximately $19,000,000 of this increase. Our rig count in the Lower 48 averaged 62.4, almost two rigs higher than the first quarter. The sequential improvement in our average rig count during the second quarter reflects some recovery in gas related drilling. We exited Q2 with 60 rigs operating in the Lower 48. The current drilling environment, particularly in oil basins, is not supportive of increased drilling activity.

[William Restrepo, Chief Financial Officer at Nabors Industries]

At this point, we're expecting a slightly softer drilling market during the third quarter than we anticipated at our first quarter conference call. Our average daily revenue at $33,466 declined sequentially by roughly $1,000 As anticipated, dollars 600 out of the $1,100 decline came from pressure on base day rates. The balance of the decline came from reimbursable revenue. However, this last revenue has little to no impact on margin. On our most recently signed contracts, daily revenue remains at the low $30,000 range.

[William Restrepo, Chief Financial Officer at Nabors Industries]

The International Drilling segment generated revenue of $385,000,000 an increase of $3,300,000 or 1% from the prior quarter, primarily driven by the full quarter impact of Parker Rigs, which more than offset the net rig count reductions on our legacy business. Parker contributed $18,100,000 to this increase. International rig count increased from 85 to 85.9 rigs during the quarter. Drilling Solutions revenue was $170,300,000 an increase of $77,100,000 or 82.7%. All of this improvement was essentially provided by the full quarter impact of Parker Wellbore.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Our Rig Technologies segment generated revenue of $36,500,000 a $7,600,000 decline sequentially, driven primarily by strong prior quarter capital equipment deliveries in The Middle East. Consolidated adjusted EBITDA for the quarter was $248,500,000 compared to $206,300,000 in the first quarter. The $42,100,000 sequential increase was primarily driven by the fourth quarter effect of Parker's operations as well as by improvements in legacy Saudi Arabia and U. S. Drilling.

[William Restrepo, Chief Financial Officer at Nabors Industries]

U. S. Drilling EBITDA of $101,800,000 was up by $9,100,000 or 9.8% sequentially. The quarter over quarter increase was driven by higher activity in our Lower 48 drilling operations along with improved performance in our legacy Alaska and U. S.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Offshore businesses. The results also reflect the full quarter of contribution from Parker operations in both Alaska and U. S. Offshore, which accounted for $6,000,000 of the total increase. In the Lower 48, our average daily rig margins were $13,902 down 2.6% from the prior quarter.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Average rig count was 62.4, up almost two rigs from the prior quarter. Although our rig count increased, we experienced some softening towards the end of the quarter. Sequentially, increased activity more than offset the effects of lower margins. For the third quarter, we forecast Lower 48 daily margins of approximately $13,300 We expect some decline in average daily revenue as we renew contracts at leading edge day rates lower than the Q2 average. We are currently forecasting third quarter average rig count of 57 to 59 rigs.

[William Restrepo, Chief Financial Officer at Nabors Industries]

On a combined basis, Alaska and U. S. Offshore generated EBITDA of $28,200,000 in the second quarter, an increase of $7,700,000 or 38% from the prior quarter. Third quarter EBITDA from these businesses should total approximately $26,000,000 We anticipate some weather related disruption to our offshore activity during the quarter. EBITDA from our international segment at $117,700,000 increased by 2,200,000 or 1.9% sequentially.

[William Restrepo, Chief Financial Officer at Nabors Industries]

The increase in EBITDA was supported by a modest improvement in average rig count, up by one rig quarter over quarter. This reflects the full quarter inclusion of Parker Rigs, startup of two newbuilds in Saudi Arabia and two reactivated rigs in Kuwait. These improvements were partially offset by the reductions in other international markets. Daily gross margin was approximately $17,534 a $113 increase. Our drilling margins were slightly lower than anticipated, reflecting startup delays in Kuwait and some operational downtime in Saudi Arabia.

[William Restrepo, Chief Financial Officer at Nabors Industries]

For the third quarter, we expect improved EBITDA by the rigs deployed in the second quarter by another newbuild startup in Saudi Arabia, our thirteenth newbuild, by an additional reactivation in Kuwait, which commenced earlier this month and by a rig starting up in India. This last rig is a legacy Parker rig already redeployed from Bangladesh. We forecast average daily gross margin to increase to $17,900 in the third quarter. Average rig count should range between eighty seven and eighty eight rigs. Drilling Solutions delivered EBITDA of 76,500,000 in the second quarter, up $35,600,000 Parker Wellbore contributed $36,300,000 to this increase.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Without Parker, our NDS business decreased slightly in the Lower 48 market as our drilling rig customer mix was less favorable. Our NDS segment comprised 25% 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 third quarter, we expect NDS EBITDA to remain in line with second quarter results. Rig Technologies EBITDA was $5,200,000 in the second quarter, slightly down sequentially from $5,600,000 Third quarter EBITDA for Rig Tech should be up $2,000,000 to $3,000,000 from the second quarter on better capital equipment deliveries.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Now turning to liquidity and cash generation. Adjusted free cash flow totaled $41,000,000 in the second quarter. This excludes transaction costs related to the Parker Welder acquisition. This compares to negative adjusted free cash flow of $61,000,000 in the first quarter. The improvement was driven by several factors, including $45,000,000 in lower cash interest paid, the Parker contribution and the normally heavy outflows in the first quarter for employee bonuses, property taxes and other annual payments.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Although we received some payments on our Mexico receivable, these were well below our targeted amount. Our customer is currently in the news as it is in the process of completing a 7,000,000,000 to $10,000,000,000 financing intended to address the outstanding payments to suppliers. We expect this race to clear most of our overdue invoices in the third quarter. Assuming we receive those collections, third quarter adjusted free cash flow should match the second quarter. Despite a somewhat softer margin in the Lower 48, the full year adjusted free cash flow should reach our prior guidance.

[William Restrepo, Chief Financial Officer at Nabors Industries]

With Parker included, total capital expenditures for Nabors in the second quarter were $199,000,000 compared to $151,000,000 in the prior quarter. This includes $77,000,000 for the Sanat newbuild program and $31,000,000 for Parker. With respect to planned twenty twenty five capital expenditures, a portion of the newbuild milestone payments has shifted into twenty twenty six. And our continued focus on cost discipline across other segments is expected to further reduce spending. As a result, we now anticipate total twenty twenty five capital expenditures to be between $700,000,000 and $710,000,000 or approximately $70,000,000 lower than previously communicated.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Within that total, we expect capital expenditures related to Saudi newbuild rigs to account for approximately $300,000,000 For the third quarter, we are currently targeting capital expenditures between 200,000,000 and $210,000,000 Before passing back to Tony, I would like to make a few comments. As Tony mentioned, my tenure as Nabors' CFO is coming to an end on September 30 to be precise. So this is my last conference call for Nabors. I would like to thank my colleagues for their support during these last 11.5, our Board of Directors for their trust in me, all of our investors for supporting our transactions and our company during some very tough periods. But especially, I would like to thank Tony Petrello for giving me this great opportunity to work with him to help turn neighbors into the amazing company it is today. Thank you, Tony, for your trust and your support all these years. You have been a great boss, an incredible teacher and now a great friend. I will miss working with you.

[William Restrepo, Chief Financial Officer at Nabors Industries]

As we previously announced, Miguel Rodriguez, our Senior Vice President of Operations Finance will step into the role of CFO next quarter. I worked with Miguel several times in Schlumberger, where he had a very successful career. Needless to say, I knew him very well. We brought Miguel to Nabors to eventually replace me upon my retirement. At that time, he was the Head of Finance for the Drilling Group in Schlumberger.

[William Restrepo, Chief Financial Officer at Nabors Industries]

His dedication, integrity, extreme competence and absolute commitment to making Nabors a best in class company have impressed us. Since joining Nabors in 2019, Miguel has made a strong impact, shaping our finance team, strengthening our cost focus and taking on broader responsibilities across the company, including not only operations finance, but also tax and treasury. We have worked closely together as he has progressively taken on additional responsibilities. I'm confident he's very well prepared to replace me and I look forward to seeing the company continue to benefit from his strong leadership. With that, I will turn the call back to Tony.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Thank you, William. I will finish this morning with a few points. Our portfolio of diversified businesses demonstrate its value in our second quarter results. Even if the Lower 48 market fell somewhat, our own operations in this market grew sequentially. We are encouraged by the expected stabilization of rig count in the second half and the prospect for a future uptick in gas drilling.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Parker did not have a drilling rig presence in the Lower 48. However, its operations certainly contributed to most of our segments. In North America, we are strengthening our footprint. We've added quail tools and casing running services in The U. S.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

As well as drilling rig services in the Gulf Of America, Canada and Alaska. Internationally, Parker adds to our strength in The Middle East together with incremental rigs in Kazakhstan and India. We believe our continued effort to integrate Parker's businesses will unlock significant additional benefit. I cannot stress enough the value brought to our company with the continued expansion of Sanid. From today, we have an awarded pipeline of eight additional rigs through 2027.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Finally, we are encouraged by the improvement in free cash flow over the first quarter. Our outlook for further growth in free cash flow positions us well to address the 2027 debt maturity before the 2025. Thank you for your time this morning. We'll now take your questions.

[Operator]

Thank you. We will now begin the question and answer session. Today's first question comes from Grant Hynes with JPMorgan. Please go ahead.

[Grant Hynes, Equity Research Associate at JP Morgan]

Hey, good morning team.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Good morning.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Good morning.

[Grant Hynes, Equity Research Associate at JP Morgan]

So it's great to see sort of the fourth big five rig award from Sanad. And just as we think about sort of the growth prospects of '27, could you perhaps speak to maybe how incremental you see these new build rigs? And if any of the suspended or legacy Nabors rigs you've seen opportunities maybe outside to work in other Middle East regions such as Kuwait?

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Sure. So mean, right now there's 52 rigs in Sanit on the payroll. A bunch of them are also neighbors owned rigs that are leased into Sanit. And I would say that virtually the entire fleet there are rigs that are well suited to anywhere in the region. And so if things did change, there is an opportunity to actually seek work in other countries.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

But right now, where we are right now, I think we believe we're pretty well suited with what the opportunities are right in the country themselves. Rigs, certain rigs are high specifications that could go to Kuwait, for example, for the gas drilling there. And obviously, every one of those markets has different attributes. So there would be incremental capital required for some redeployments. But by and large, we're really happy with our fleet in The Middle East in general.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

I think our positions in Kuwait, Oman and UAE as well, we're really happy with that as a fleet as a whole. I don't think there's anybody in the marketplace that has a better fleet poised for all the opportunities in that region.

[Grant Hynes, Equity Research Associate at JP Morgan]

Appreciate the color. And then as a follow-up, maybe just a clarification. When considering sort of the flat $80,000,000 adjusted free cash flow guide, it looks like $30,000,000 lower cash burn at Synod, 60,000,000 less newbuild CapEx and I think $10,000,000 lower 48,000,000 and other implied CapEx. Could you just help us reconcile sort of the unchanged free cash guide in that context?

[William Restrepo, Chief Financial Officer at Nabors Industries]

So, I mean, there's a lot of moving pieces in Sanat by the way. In reality, have a $70,000,000 cut in CapEx, but we also because these cuts come late in the year, we also cut back on the CapEx liabilities. So we weren't expecting to pay those by year end. So in reality, the impact on cash flow is about $50,000,000 really. We have adjusted, of course, The U.

[William Restrepo, Chief Financial Officer at Nabors Industries]

S. Following the Liberation Day noise, which did have an impact or we think will have an impact in Lower 48 rig count. Across segments, I think that is about $15,000,000 one-five. In addition, there is still some uncertainty in Mexico. So, we took a cautious reduction in our forecast for Mexico of about $10,000,000 And we think in places like Argentina where we're seeing some reduction in activity from some clients as well as delays in deployments in Kuwait and Saudi Arabia, we took a combined $15,000,000 So roughly $40,000,000 of EBITDA we took off the forecast.

[William Restrepo, Chief Financial Officer at Nabors Industries]

And the CapEx is about a $50,000,000 improvement net of the payable.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Appreciate the color. Thank you.

[Operator]

Thank you. And our next question today comes from Waqar Syed with ATB Capital Markets. Please go ahead.

[Waqar Syed, MD & Head of Research at ATB Capital Markets]

Thank you for taking my question. Well, first of all, I really want to thank William for his friendship all these years. William, I've always enjoyed speaking to you. I've learned a lot from you. And you really will be missed by all the investor community and all the analysts who follow Nabors.

[Waqar Syed, MD & Head of Research at ATB Capital Markets]

So best of luck in your next chapter. And I will personally miss you as you move on.

[William Restrepo, Chief Financial Officer at Nabors Industries]

I'll miss you too, Sayed. So I hope you ask an easy question now.

[Waqar Syed, MD & Head of Research at ATB Capital Markets]

Always easy On the Saudi market, we've seen some rigs being released. What is the what are the risks to some of the Nabors legacy rigs in Saudi Arabia?

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Sure. Well, let's just comment in general what's been going on there. Since the start of 2024, I think 64 land rigs were idled and 35 rigs went back, became online. So the net down was about 29 rigs from about two zero seven to 178. Since June 30, it looks like there may be an additional four or five rigs that also suspended.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

And I have no secrets in terms of understanding what the ramp was really doing here, but from what I gather, what they're actually doing is evaluating the current production rate, is 9.3 to 9.5 barrels a day and looking at their maximum production of 12 and trying to right size what their investment should be between those two things and figuring that out. And so that's the process that's going on right now to figure out a resetting of that to make sure that they can fulfill that. And so that's the process and obviously it's caused a bunch of friction. With us, obviously during this period, Sanford actually increased the rig count by four rigs, which is obviously due to the new build program. And we stand at 52 today.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

And we also would note that Sanford hasn't been unscathed as we marked during the past year. We actually had three rigs suspended. So we believe we're very well positioned for obvious reasons with the relationship with Aramco, but also the Sanit operating fleet has more than 75% of the rigs are gas functioning rigs. And that is where the growing focus has been in the kingdom. And then obviously the new build program, which as you can see from this announcement, I know there was some concern that this was going be delayed or revisited.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

But Aramco seems to be very committed to this long term new build program, which is an agenda item for the Vision 2030 as well. So there's a lot of other factors going into it. And so they've been very supportive of it and that's given us a really good confidence in what we're doing right now. So I think all in all that puts us in a pretty good position going forward. And we're focused on just building a great company right now.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Ricardo, those rigs were suspended last year for us.

[Waqar Syed, MD & Head of Research at ATB Capital Markets]

Yes.

[Waqar Syed, MD & Head of Research at ATB Capital Markets]

And then on The U. S. Lower 48 drilling margins, 13,300 that's the guidance for Q3. Do you think margins kind of bottom here based on what you know or that it could be more downside as additional rigs mark to market?

[William Restrepo, Chief Financial Officer at Nabors Industries]

Waqar, one thing that encourages us is that for now multiple quarters, the actual revenue per day on a leading edge basis has stayed fairly consistent and above the 30,000 level. So, is encouraging because we've had a significant stability now for three plus quarters. I would say that the fact that that level though is maybe a thousand, a little bit over a thousand dollars lower than our average for the fleet means that that's why we're dialing in 13,300 for the third quarter because we will continue to erode a little bit. But once we get there, we're very, very close then to where the leading edge is. And yes, I do think that we should be able to sustain ourselves about the 13,000 level.

[Waqar Syed, MD & Head of Research at ATB Capital Markets]

Great. Well, thank you very much for the answers. And once again, William, thank you for your friendship. Have a wonderful next chapter of your life.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Thank you, Waqar.

[Operator]

Thanks everybody. And our next question today comes from Keith Mackey with RBC. Please go ahead.

[Keith Mackey, Director, Global Equity Research, Oil & Gas Services at RBC Capital Markets]

Hi, good morning.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Good Good morning, Keith.

[Keith Mackey, Director, Global Equity Research, Oil & Gas Services at RBC Capital Markets]

Good morning. Can we I know it's early to do so, but thinking about twenty twenty six potential CapEx levels, can you maybe just run through some of the drivers of how you'd build up the CapEx budget for 2026 or any notable pieces that would make CapEx in 2026 different from the 700,000,000 to $710,000,000 you'd expect to spend in 2025?

[William Restrepo, Chief Financial Officer at Nabors Industries]

So, it's a good question Keith. The way we build it definitely SANET is very easy because we have milestones all the way through 2027 in terms of payments and deployments. So that piece, the new builds is fairly easy to do. And probably will be somewhere in the mid 300 range for 2026 given the recent awards. I would say that the rest is just average CapEx, sustaining CapEx for a fleet, which is going be a bit bigger next year than this year we think.

[William Restrepo, Chief Financial Officer at Nabors Industries]

So in The U. S, we know what the average is and then in the international market is a little bit higher than in The U. S. So based on those numbers, construct the what we expect to be our well known CapEx. Then we have other issues like for instance, in places like Saudi Arabia, we have recertification CapEx.

[William Restrepo, Chief Financial Officer at Nabors Industries]

And again, we know what that is going to be because that is all it has specific dates. So that adds a little bit to the cost. And then, if we win contracts internationally in particular areas and we estimate how much of many of those wins are going to be, then we add a little bit more CapEx for the recontracting requirements of the client. So, based on that, I can tell you with quite a bit of certainty that we will be a little bit higher next year than this year just because the fleet is going to be larger. And so, that's our estimate at this point.

[William Restrepo, Chief Financial Officer at Nabors Industries]

We haven't started the process yet, but we think that the CapEx is going be a bit higher next year than this year.

[Keith Mackey, Director, Global Equity Research, Oil & Gas Services at RBC Capital Markets]

Got it. Appreciate that color there William. Maybe just on Mexico, can you talk a little bit more about the collections? Noted you're a little bit behind where you expected or hope to be in Q2. Can you just talk about sort of the process there? And any potential actions or methods you can to increase the collections? I it might be sensitive to get into too many specifics, but any color you can give around that would be helpful in terms of what you can do in the amounts and all that sort of stuff.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Sure. I'll let William give you the details. But I just want to make one comment, which is I think Nabors position there is a very great position in the sense that the rigs that we have there are viewed as really core to the ongoing production that Pemex has. They're unique because of their unique capabilities of fitting out platforms and moving cost effectively. So I think one of the things we got going for us is that Pemex does really value Nabors as a vendor and wants us to continue in the country.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

So that is one thing that we're we think is a real attribute of our position there.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Yes. So from Tony, in reality, most of these rigs end up being direct negotiations with the client because they absolutely want to keep them. So on collection side, in the second quarter, we were already kind of advanced with one of the financial institutions in the country that has a special relationship with Pemex whereby they take on the receivable and pay us the money or in payments bonds or whatever mechanism they create without recourse. So we've done that in the past and we thought in the second quarter that's what was going to happen. But towards the middle of the second quarter, I think the government decided to take the bull by the horns and take direct control of this process.

[William Restrepo, Chief Financial Officer at Nabors Industries]

And in reality, I mentioned during the call that 7 to $10,000,000,000 but I just saw some news a second ago that in reality it was $12,000,000,000 what they issued or they put in place to reduce the vendor, the overdue vendor invoices. We think this should move very quickly, the process and somewhere over the next couple of weeks, three weeks or so, we will be able to make very substantial collections. We are assuming somewhere in the range of 40 plus million during the third quarter.

[Keith Mackey, Director, Global Equity Research, Oil & Gas Services at RBC Capital Markets]

All right. Thank you both very much for the color. And William, certainly congrats on a great career and best of luck in your next chapter.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Thank you, Pete. Appreciate it.

[Operator]

Thank you. And our next question today comes from Jeff LeBlanc at CPH. Please go ahead.

[Jeff LeBlanc, Director - Equity Research at TPH&Co]

Good morning, Tony and team. Thanks for taking my question.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Sure.

[Jeff LeBlanc, Director - Equity Research at TPH&Co]

Just wanted to see if you could comment on Lower 48 daily drilling costs moving forward where you think they'll ultimately stabilize long term, as I believe you previously mentioned it was going to be a focus area moving forward? Thank you.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Obviously, that's been a focus of ours to right size the operation. You noticed in the first quarter where we paid a price with churn on the cost structures, But I think we have it pretty well under control. We don't see a lot of inflation right now in our costs. We're just trying to optimize against our rig count, not only the direct costs, and obviously there it's a deal of having purchasing group supply chain get the best deals given this environment, but also right size our support structure for the existing rig count. So we think there's more good things to happen there, but that remains a focus of ours.

[Jeff LeBlanc, Director - Equity Research at TPH&Co]

Okay. Thanks for the color. I'll hand the call back to the operator. Thank you.

[Operator]

Thank you. And our next question today comes from Michael Smaller with Susquehanna. Please

[Analyst]

Yes. Thanks guys. Just going back to the reduction in CapEx related to this and add new builds this year. Does that does the push from 25,000,000 to 26,000,000 for that $60,000,000 push the $26 spend to 27,000,000 I. E.

[Analyst]

Is the whole schedule pushed out? Or is there at least for now an increased amount in '26 to be further negotiated out? I just think the more flexibility investors understand you guys have, I think the better. Curious if you could comment on the schedule for basically all through 20 rigs now that they've been awarded?

[William Restrepo, Chief Financial Officer at Nabors Industries]

The schedule is the driver. It's not really, I mean, we're going to be spending the amount because the rigs are the same number. It's just that some of those milestones shifted somewhat into 2026. And I would assume that that will mean that twenty twenty six milestones will shift a little bit into 2027. The impact on revenue is not dramatic because it's really mostly milestones of uncompleted rigs.

[William Restrepo, Chief Financial Officer at Nabors Industries]

It's not really rig deployments. We did have some delays in 2025 on the deployment of the Saudi rigs, maybe a month per rig or something like that. But it's not a massive impact on revenue. Maybe I think probably Saudi Arabia the impact has been about $5,000,000 in revenue or in EBITDA, I guess, in '25. But again, it's more a slippage than a reduction in CapEx.

[Analyst]

Perfect. Thank you and congrats again, Malia.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Thank you. Thank you.

[Operator]

Thank you. And our next question today comes from John Daniel at Daniel Energy Partners. Please go ahead.

[John Daniel, Founder & CEO at Daniel Energy Partners]

Hi, thank you for including me, William. Congrats on retirement. If your next chapter turns out to be boring, give us a call. We're a safe space for the AARP community. Tony, just one question for you.

[John Daniel, Founder & CEO at Daniel Energy Partners]

Do you ever have any interesting sort of looking at more productions oriented services. And I hate to bring up the past, but would you ever consider revisiting, say, something like the well service sector or something along those lines?

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Obviously, I think as the industry gets to the point where the goal is to maximize EUR, I think the notion of having something in our portfolio that gives some benefits along those lines makes sense. And one of the things that we are doing actually within our existing downhole fleet is putting more emphasis on some of our tools that actually can survey the wellbore in the lateral and give an operator a better idea of how to extract value in the EUR with intelligent fracking. And so that is one area to do that. Things that would complement that, yes, we would be open to it because we think long term as the industry moves into this more mature environment, you need to get on the mill to help them address the quest for lower BOE. So things that would make logical sense that would be contiguous to what Nabors does, think would fit that would be of interest to us I would say.

[William Restrepo, Chief Financial Officer at Nabors Industries]

And that's unlikely we'll get back into pressure pumping.

[Anthony Petrello, Chairperson, President & CEO at Nabors Industries]

Yes, exactly. Pressure pumping Yes. Is

[John Daniel, Founder & CEO at Daniel Energy Partners]

Okay. Fair enough. All right. That's all I had.

[William Conroy, Vice President of Corporate Development & Investor Relations at Nabors Industries]

Thanks and congrats again, Wayne.

[William Restrepo, Chief Financial Officer at Nabors Industries]

Great.

[Operator]

Thank you. This concludes the question and answer session. I'd like to turn the conference back over to Nabors for any closing remarks.

[William Conroy, Vice President of Corporate Development & Investor Relations at Nabors Industries]

Thank you, Rocco. If there are any questions or follow ups, please reach out to the Nabors IR team. With that, Rocco, we'll wrap up the call.

[Operator]

Yes, sir. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Participants

Executives

• William Conroy, Vice President of Corporate Development & Investor Relations
• Anthony Petrello, Chairperson, President & CEO
• William Restrepo, Chief Financial Officer

Analysts

• Grant Hynes, Equity Research Associate at JP Morgan
• Waqar Syed, MD & Head of Research at ATB Capital Markets
• Keith Mackey, Director, Global Equity Research, Oil & Gas Services at RBC Capital Markets
• Jeff LeBlanc, Director - Equity Research at TPH&Co
• Analyst
• John Daniel, Founder & CEO at Daniel Energy Partners