Nabors Industries Ltd.
AMEX : NBR

Nabors Industries Ltd.

October 24, 2005 16:05 ET

Nabors Posts Record EPS of $1.11, Net of Hurricane Charges: Announces Plans to Move to the NYSE

HAMILTON, Bermuda--(CCNMatthews - Oct 24, 2005) -

Nabors Industries Ltd. (AMEX:NBR), today announced its results for the third quarter and nine months ended September 30, 2005. Adjusted income derived from operating activities(1) was $241.9 million for the third quarter compared to $84.1 million in the third quarter of 2004 and $173.8 million in the second quarter of this year. Net income was $178.9 million ($1.11 per diluted share) for the third quarter compared to $75.6 million ($0.48 per diluted share) in the third quarter of 2004 and $131.8 million ($0.82 per diluted share) in the second quarter of this year. For the nine months ended September 30, 2005, adjusted income derived from operating activities was $587.6 million, compared to $215.8 million in 2004. Net income for the first nine months of 2005 was $438.1 million ($2.73 per diluted share) compared to $193.7 million ($1.24 per diluted share) in the first nine months of 2004.

The Company also made public its intention to move the listing of its shares to the New York Stock Exchange (NYSE) by way of its filing today of a listing application with the NYSE. Trading of the shares is expected to commence on November 3, 2005 under the existing ticker symbol NBR. Until then Nabors stock will continue to trade on the American Stock Exchange.

Gene Isenberg, Nabors' Chairman and Chief Executive Officer commented on the results, "Our third quarter results were impressive particularly considering they include hurricane related net charges of approximately $0.03 per share. Nearly every one of our businesses contributed meaningfully to both the year-over-year and sequential quarterly improvement. Every sign, across all of our businesses, continues to reinforce our long-held conviction that this cycle will be more powerful and enduring than previous energy cycles. We are still seeing a surprisingly strong pricing environment across our North American land markets and the beginning of similar pricing momentum internationally as global rig demand substantially exceeds the industry's ability to add capacity. Our forward optimism is underpinned by our customer's powerful returns, as demonstrated by their willingness to commit to three-year term contracts for new rigs with deliveries as far away as 2007. The strength and breadth of demand for new higher specification rigs worldwide is warranting substantial capacity expansion. Nabors is utilizing its inherent cost and infrastructure advantages to capture a disproportionate share of this incremental demand with an increasing proportion of new built rigs and a significant but diminishing capacity for reactivating and upgrading existing rigs.

"Over the last two years our various subsidiaries have completed and deployed 14 new built drilling rigs and secured term commitments underwriting an additional 47 new rigs for a total of 61 new rigs. This puts us well on our way to fulfilling our expectation of deploying 100 incremental newly constructed rigs by mid-2007, as stated in last quarter's earnings release. We have a large number of pending proposals and ongoing discussions regarding further new rig commitments in all of our North American and international units. The majority of the rig commitments-to-date will be deployed by our U.S. Lower 48 Land Drilling unit but the magnitude of new rigs internationally is likely to become much larger over the next year. We are also continuing to add rig capacity with reactivated rigs, having completed 90 since the beginning of last year, with another 6 currently in process.

"The average gross margin per rig day in our U.S. Lower 48 Land Drilling unit increased more than expected to $7,603 in the quarter and are continuing to increase. We averaged 244 rigs operating during the quarter and expect to average over 250 in the fourth quarter. Canada posted better than expected results, despite a couple of weeks of adverse weather, illustrating that market's strong demand. Plans by our customers continue to show increased activity and longer duration contract commitments. Canada's Academy entity is constructing a total of 15 new drilling rigs and 20 coiled tubing / stem drilling rigs with most of the near-term drilling rig capacity dedicated to the U.S. Lower 48 Land Drilling operation.

"Our International business is beginning to show its potential with large increases in drilling programs planned in virtually every market where we operate or are pursuing. The largest potential exists in our Middle East and North Africa markets but sizeable programs are also being planned in several Latin American and other countries. Long lead times and bureaucratic bid processes make precise timing of these projects difficult to predict but we can uniquely provide our customers the greatest number of rigs in the shortest time. Our international unit currently has 8 new rigs and one existing Jackup (Dolphin 111) in various stages of construction or deployment in fulfillment of term contract commitments. These rigs are committed for work in multiple venues including Saudi Arabia, Venezuela, Algeria, Australia, Gabon and Angola. Over the last twelve months this unit's working rig count has increased by nearly 20 rigs (30%) and average rig margins have increased by approximately $800 per day over the same period. We expect to report even more significant increases in both rigs working and pricing over the next four quarters as this market further materializes.

"Our U.S. Offshore results were good considering the impact of two severe hurricanes during the quarter. This unit's fourth and first quarter results will reflect a small diminution of income as repairs to Barge Rig 300 and two jackups are completed. We did incur a total loss on one rig, SSD XII and are commencing construction on a replacement rig SSD XX as well as one additional rig SSD XXI, given the near 100% utilization this class of rig has achieved over the last several years. Likewise, given the strong demand for shallow water deep shelf drilling we are building another ultra-deep drilling Barge Rig 301. We are able to do so at a favorable capital costs by utilizing an existing posted barge hull and some components from our equipment inventory. The outlook for this unit is much improved and the net impact of the hurricanes is likely to be more than offset in future periods as we are seeing substantial increases in the demand and pricing for both our working and stacked Jackups and platform rigs in light of the reduced Jackup fleet and rapidly escalating rates.

"Our U.S. Land Well-Servicing unit continues to see strong market conditions and anticipates further pricing increases for the next several quarters as demand for rigs continues unabated. During the quarter we received the first three of 41 new 500 HP PLC Millennium workover rigs which should continue at 4 per month increasing to six per month over the next few quarters. This unique rig has been so well received by current and prospective customers that we have exercised our option for an additional 40 rigs. We are also proposing a number of these rigs for international customers. This unit also has 20 new truck mounted 200 HP rigs on order with the first deliveries to commence before the end of 2005 as well as a large quantity of trucks and trailers for increased capacity in its fluid hauling and disposal business. During the quarter we renamed this unit, Nabors Well Servicing, replacing the previous Pool name style, in order to better align the identity and synergies between this unit and our other businesses. All of our other units were in-line with our expectations and anticipate improving results from both pricing and volume as we move into 2006.

"While strong pricing improvement across all of our units will continue to be the largest component of our growth in the intermediate term, dramatic increases from new capacity should be the dominant factor in the longer-term. There appears to be no end to the opportunities we have at hand and for the first time in my tenure we can exercise a high degree of selectivity in evaluating the projects we pursue based upon the risk adjusted returns."

The Company will post a group of slides on its website (at approximately 11:30 a.m. Eastern Time) for interested investors to utilize in following the review of its business outlook during a conference call it will conduct, tomorrow Tuesday October 25, 2005, at 12:00 Noon Eastern Time (11:00 a.m. Central Time). The call can be accessed on our website at www.nabors.com, or through First Call at www.firstcallevents.com. The slides will be available on the Nabors website and can be viewed or downloaded by going to "Investor Information" and then to "Events Calendar." In addition, the customary format of the call regarding individual business unit margins and activity will be available in the slides on the website in that the call time will be more focused toward the outlook and the impact of the current capital spending opportunities.

The Nabors companies own and operate almost 600 land drilling and approximately 875 land workover and well-servicing rigs worldwide. Offshore, Nabors operates 43 platform rigs, 19 jack-up units and three barge rigs in the United States and multiple international markets. Nabors markets 28 marine transportation and supply vessels, primarily in the U.S. Gulf of Mexico. 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, gas and geothermal markets in the world.

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. For further information, please contact Dennis A. Smith, Director of Corporate Development of Nabors Corporate Services, Inc. at 281-775-8038. To request Investor Materials, call our corporate headquarters in Hamilton, Bermuda at 441-292-1510 or via email at dan.mclachlin@nabors.com.



(1) Adjusted income 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 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."





NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended Nine Months Ended
----------------------------- ----------------------
September 30, June 30, September 30,
----------------------------- ----------------------

(In thousands,
except per share
amounts) 2005 2004 2005 2005 2004
-------- -------- -------- ---------- ---------

Revenues and
other income:
Operating
revenues $893,254 $585,652 $765,337 $2,442,319 $1,709,348
Earnings
(losses) from
unconsolidated
affiliates 91 (292) 5,204 7,298 4,683
Investment
income 27,178 12,222 15,578 54,544 33,106
-------- -------- -------- ---------- ----------
Total revenues
and other
income 920,523 597,582 786,119 2,504,161 1,747,137
-------- -------- -------- ---------- ----------

Costs and other
deductions:
Direct costs 500,552 378,084 454,584 1,429,762 1,137,065
General and
administrative
expenses 65,879 49,548 59,805 184,325 140,588
Depreciation
and
amortization 73,673 64,229 70,982 212,843 185,560
Depletion 11,349 9,408 11,343 35,045 34,995
Interest
expense 11,195 10,533 11,333 33,265 37,779
Losses (gains)
on sales of
long-lived assets,
impairment charges
and other expense
(income), net 15,684 1,487 4,223 23,778 (3,339)
-------- -------- -------- ---------- ----------
Total costs
and other
deductions 678,332 513,289 612,270 1,919,018 1,532,648
-------- -------- -------- ---------- ----------

Income before
income taxes 242,191 84,293 173,849 585,143 214,489

Income tax
expense 63,334 8,667 42,044 147,067 20,798
-------- -------- -------- ---------- ----------

Net income $178,857 $ 75,626 $131,805 $ 438,076 $ 193,691
======== ======== ======== ========== ==========

Earnings per
share (1):
Basic $ 1.14 $ .51 $ .84 $ 2.82 $ 1.30
Diluted $ 1.11 $ .48 $ .82 $ 2.73 $ 1.24

Weighted-average
number of common
shares
outstanding (1):
Basic 157,209 149,089 157,440 155,605 148,646
-------- -------- -------- ---------- ----------
Diluted 161,850 163,919 161,212 160,614 163,584
-------- -------- -------- ---------- ----------


Adjusted income
derived from
operating
activities (2) $241,892 $ 84,091 $173,827 $ 587,642 $ 215,823
======== ======== ======== ========== ==========

(1) See "Computation of Earnings Per Share" included herein as a
separate schedule.

(2) Adjusted income 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 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".



NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 30, June 30, December 31,
(In thousands, except ratios) 2005 2005 2004
------------- ---------- ------------

ASSETS
Current assets:
Cash and short-term
investments $1,431,589 $1,061,288 $ 900,551
Accounts receivable, net 734,982 619,330 540,103
Other current assets 201,522 152,597 140,320
---------- ---------- ----------
Total current assets 2,368,093 1,833,215 1,580,974
Long-term investments 208,269 518,070 510,496
Property, plant and equipment,
net 3,622,732 3,460,599 3,275,495
Goodwill, net 342,116 331,635 327,225
Other long-term assets 161,124 165,073 168,419
---------- ---------- ----------
Total assets $6,702,334 $6,308,592 $5,862,609
========== ========== ==========

LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term
debt $ 819,682 $ 814,607 $ 804,550
Other current liabilities 483,068 426,923 394,766
---------- ---------- ----------
Total current liabilities 1,302,750 1,241,530 1,199,316
Long-term debt 1,197,810 1,203,409 1,201,686
Other long-term liabilities 635,622 573,044 532,214
---------- ---------- ----------
Total liabilities 3,136,182 3,017,983 2,933,216
Shareholders' equity 3,566,152 3,290,609 2,929,393
---------- ---------- ----------
Total liabilities and
shareholders' equity $6,702,334 $6,308,592 $5,862,609
========== ========== ==========



Cash, short-term and long-term
investments $1,639,858 $1,579,358 $1,411,047

Funded debt to capital ratio:
- Gross 0.36 : 1 0.38 : 1 0.41 : 1
- Net of cash and
investments 0.1 : 1 0.12 : 1 0.17 : 1
Interest coverage ratio: 24.5 21.1 14.1



NABORS INDUSTRIES LTD. AND SUBSIDIARIES
SEGMENT REPORTING
(Unaudited)

The following tables set forth certain information with respect to
our reportable segments and rig activity:

Three Months Ended Nine Months Ended
-----------------------------------------------------
September 30, June 30, September 30,
------------------- --------- -----------------------

(In thousands,
except rig
activity) 2005 2004 2005 2005 2004
-------- -------- -------- ---------- ----------

Reportable
segments:
Operating
revenues and
Earnings from
unconsolidated
affiliates:
Contract
Drilling: (1)
U.S. Lower 48
Land
Drilling $355,172 $202,283 $300,700 914,862 527,700
U.S. Land
Well-
servicing 130,265 95,377 118,776 355,154 263,018
U.S. Offshore 42,115 33,929 45,130 125,312 96,806
Alaska 18,159 16,982 21,955 64,882 66,020
Canada 131,348 89,293 76,720 381,470 289,964
International 143,355 111,618 135,168 402,553 321,790
-------- -------- -------- ---------- ----------
Subtotal
Contract
Drilling (2) 820,414 549,482 698,449 2,244,233 1,565,298

Oil and Gas (3) 16,354 14,216 15,218 46,871 49,515
Other
Operating
Segments (4)(5) 81,753 41,408 78,729 229,398 150,086
Other
reconciling
items (6) (25,176) (19,746) (21,855) (70,885) (50,868)
-------- -------- -------- ---------- ----------
Total $893,345 $585,360 $770,541 $2,449,617 $1,714,031
======== ======== ======== ========== ==========

Adjusted income
(loss) derived
from operating
activities:
Contract
Drilling: (1)
U.S. Lower 48
Land
Drilling $135,295 $ 30,221 $101,813 $ 310,567 $ 51,760
U.S. Land
Well-
servicing 29,297 18,511 26,401 75,126 42,638
U.S. Offshore 12,883 4,507 12,498 32,392 14,120
Alaska 3,612 2,522 4,159 13,743 13,488
Canada 28,106 13,888 57 75,443 60,011
International 38,630 24,713 32,558 100,955 62,057
-------- -------- -------- ---------- ----------
Subtotal
Contract
Drilling (2) 247,823 94,362 177,486 608,226 244,074

Oil and Gas (3) 3,998 4,018 2,869 7,741 9,420
Other Operating
Segments (4)(5) 7,465 (3,094) 7,982 18,997 (5,631)
Other
reconciling
items (7) (17,394) (11,195) (14,510) (47,322) (32,040)
-------- -------- -------- ---------- ----------
Total 241,892 84,091 173,827 587,642 215,823
Interest expense (11,195) (10,533) (11,333) (33,265) (37,779)
Investment
income 27,178 12,222 15,578 54,544 33,106
Gains (losses)
on sales of
long-lived
assets,
impairment
charges and
other income
(expense), net (15,684) (1,487) (4,223) (23,778) 3,339
-------- -------- -------- ---------- ----------
Income before
income taxes $242,191 $ 84,293 $173,849 $ 585,143 $ 214,489
======== ======== ======== ========== ==========


Rig activity:
Rig years: (8)
U.S. Lower 48
Land
Drilling 244.2 207.9 229.3 232.0 192.2
U.S. Offshore 15.7 14.0 17.2 16.2 14.4
Alaska 6.5 6.4 6.8 6.7 6.9
Canada 54.7 41.9 26.2 49.0 43.6
International (9) 84.8 66.3 83.4 81.1 65.6
-------- -------- -------- ---------- ----------
Total rig
years 405.9 336.5 362.9 385.0 322.7
======== ======== ======== ========== ==========
Rig hours: (10)
U.S. Land
Well-
servicing 313,677 289,312 308,718 919,006 851,810
Canada Well-
servicing 89,329 86,676 60,297 263,962 272,145
-------- -------- -------- ---------- ----------
Total rig
hours 403,006 375,988 369,015 1,182,968 1,123,955
======== ======== ======== ========== ==========

(1) These segments include our drilling, workover and well-servicing
operations, on land and offshore.

(2) Includes Earnings (losses) from unconsolidated affiliates,
accounted for by the equity method, of $(1.1) million, $(0.26)
million and $1.2 million for the three months ended September 30,
2005 and 2004 and June 30, 2005, respectively, and $0.7 million
and $1.9 million for the nine months ended September 30, 2005 and
2004, respectively.

(3) Represents our oil and gas exploration, development and production
operations.

(4) Includes our marine transportation and supply services, drilling
technology and top drive manufacturing, directional drilling, rig
instrumentation and software, and construction and logistics
operations.

(5) Includes Earnings (losses) from unconsolidated affiliates,
accounted for by the equity method, of $1.2 million, $(.03)
million and $4.0 million for the three months ended September 30,
2005 and 2004 and June 30, 2005, respectively, and $6.6 million
and $2.8 million for the nine months ended September 30, 2005 and
2004, respectively.

(6) Represents the elimination of inter-segment transactions.

(7) Represents the elimination of inter-segment transactions and
unallocated corporate expenses.

(8) Excludes well-servicing rigs, which are measured in rig hours.
Includes our equivalent percentage ownership of rigs owned by
unconsolidated affiliates. Rig years represents 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.

(9) International rig years include our equivalent percentage
ownership of rigs owned by unconsolidated affiliates which totaled
4.0 years during the three months ended September 30, 2005 and
2004 and three months ended June 30, 2005, and 3.9 years and 4.0
years during the nine months ended September 30, 2005 and 2004,
respectively.

(10) Rig hours represents the number of hours that our well-servicing
rig fleet operated during the period.



NABORS INDUSTRIES LTD. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)

A reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations is as follows:

Three Months Ended Nine Months Ended
----------------------------- -------------------
September 30, June 30, September 30,
----------------------------- -------------------

(In thousands,
except per share
amounts) 2005 2004 2005 2005 2004
-------- -------- -------- -------- --------

Net income
(numerator):
Net income -
basic $178,857 $ 75,626 $131,805 $438,076 $193,691
Add interest
expense on
assumed
conversion of
our zero coupon
convertible/
exchangeable
senior debentures/
notes, net of
tax:
$1.381 billion due
2021 (1) - 3,119 - - 9,299
$700 million due
2023 (2) - - - - -
-------- -------- -------- -------- --------
Adjusted net
income - diluted $178,857 $ 78,745 $131,805 $438,076 $202,990
-------- -------- -------- -------- --------

Earnings per
share:
Basic $ 1.14 $ .51 $ .84 $ 2.82 $ 1.30
Diluted $ 1.11 $ .48 $ .82 $ 2.73 $ 1.24

Shares
(denominator):
Weighted-average
number of shares
outstanding -
basic (3) 157,209 149,089 157,440 155,605 148,646
Net effect of
dilutive stock
options,
warrants and
restricted stock
awards based
on the treasury
stock method 4,641 6,339 3,772 5,009 6,447
Assumed
conversion of
our zero coupon
convertible/
exchangeable
senior
debentures/
notes:
$1.381 billion
due 2021 (1) - 8,491 - - 8,491
$700 million
due 2023 (2) - - - - -
-------- -------- -------- -------- --------
Weighted-average
number of shares
outstanding -
diluted 161,850 163,919 161,212 160,614 163,584
-------- -------- -------- -------- --------

(1) Diluted earnings per share for the three months ended September
30, 2005 and June 30, 2005 and for the nine months ended September
30, 2005 excludes approximately 8.5 million potentially dilutive
shares initially issuable upon the conversion of these debentures.
Such shares did not impact our calculation of diluted earnings per
share for the three months ended September 30, 2005 and June 30,
2005, and for the nine months ended September 30, 2005 as we are
required to pay cash up to the principal amount of any debentures
converted resulting from the issuance of a supplemental indenture
relating to the debentures in October 2004. We would only issue an
incremental number of shares upon conversion of these debentures,
and such shares would only be included in the calculation of the
weighted-average number of shares outstanding in our diluted
earnings per share calculation, if the price of our shares
exceeded approximately $97. Diluted earnings per share for the
three and nine months ended September 30, 2004 reflects the
assumed conversion of our $1.381 billion zero coupon convertible
senior debentures due 2021, as the conversion in those periods
would have been dilutive.

(2) Diluted earnings per share for the three months ended September
30, 2005, June 30, 2005 and September 30, 2004, and for the nine
months ended September 30, 2005 and 2004 excludes approximately
10.0 million potentially dilutive shares initially issuable upon
the exchange of our $700 million zero coupon senior exchangeable
notes due 2023. Such shares did not impact our calculation of
diluted earnings per share for the three months ended September
30, 2005, and June 30, 2005, and for the nine months ended
September 30, 2005 as we are required to pay cash up to the
principal amount of any notes exchanged as a result of the
supplemental indenture issued for these notes during the fourth
quarter of 2004. We would only issue an incremental number of
shares upon exchange of these notes, and such shares would only be
included in the calculation of the weighted-average number of
shares outstanding in our diluted earnings per share calculation,
if the price of our shares exceeded $70.10. Such shares did not
impact our calculation of diluted earnings per share for the three
and nine months ended September 30, 2004 as the notes are
contingently exchangeable under certain circumstances and would
only be included in the calculation of the weighted-average number
of shares outstanding- diluted if any of those criteria were met.
Such criteria were not met during the three and nine months ended
September 30, 2004. Based on the initial exchange price per share,
these notes would have been exchangeable for our common shares
during those periods if the closing sale price per share of
Nabors' common shares for at least 20 trading days during the
period of 30 consecutive trading days ending on the last trading
day of the previous calendar quarter was greater than or equal to
$84.12.

(3) Includes the following weighted-average number of common shares of
Nabors and weighted-average number of exchangeable shares of
Nabors Exchangeco (Canada) Inc., an indirect wholly-owned Canadian
subsidiary of Nabors, respectively: 157.0 million and .2 million
shares for the three months ended September 30, 2005; 148.8
million and .3 million shares for the three months ended September
30, 2004; 157.2 million and .2 million shares for the three months
ended June 30, 2005; 155.4 million and .2 million shares for the
nine months ended September 30, 2005; and 148.3 million and .3
million shares for the nine months ended September 30, 2004. The
exchangeable shares of Nabors Exchangeco are exchangeable for
Nabors common shares on a one-for-one basis, and have essentially
identical rights as Nabors Industries Ltd. common shares,
including but not limited to voting rights and the right to
receive dividends, if any.



Contact Information

  • Nabors Corporate Services, Inc.
    Dennis A. Smith, 281-775-8038