Good morning and welcome to the Nabors Industries Third Quarter 2014 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Dennis Smith, Director of Corporate Development. Please go ahead.

Good morning, everyone, and thank you for joining Nabors earnings teleconference. Today, we will follow our customary format with Chairman, President and Chief Executive Officer, Tony Petrello; and William Restrepo, our Chief Financial Officer providing our perspectives on the quarter’s results along with some insight into the trends we’re seeing in our markets and how we expect Nabors to benefit from these trends. In support of these remarks, we have posted some slides to our website, which you can access to follow along with the presentation if you desire. They are accessible in two ways. If you are participating by webcast, they’re available to download within the webcast. Alternatively, you can download the slides from within the Investor Relations section of nabors.com, under the Events Calendar sub-menu where you will find them listed as supporting materials under the conference call listing. Instructions for the replay are posted on the website. With us today in addition to Tony, William and myself are Laura Doerre, our General Counsel and the heads of our various operating units. Since much of our commentary today will concern our expectations of the future, 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 its filings with the Securities and Exchange Commission. As a result of these factors, our actual results may differ materially from those indicated or implied by such forward-looking statements. Now, I will turn the call over to Tony to begin.

Good morning. Welcome to the Nabors Industries conference call to review the results for the third quarter of 2014. We appreciate your participation this morning. As Dennis mentioned, we’ve posted the quarterly presentation slides on our website. I’ll begin with some opening remarks, William will then follow with a discussion of the third quarter financial results and I’ll wrap up to take questions. Before discussing our results, I would like to comment on our performance for the third quarter. Following a solid second quarter, we saw an improvement in the combined performance of our drilling businesses. The drilling solutions we bring to the market in both the U.S. and international rig markets and from Canrig continue to gain acceptance particularly in our customers' most challenging wells. Together with our market improvement initiatives, we see this acceptance evidenced in our financial results. So now to our results. Revenue for the third quarter of 1.8 billion increased by 12% compared to the prior quarter. The quarter benefited from strong demand for our U.S. drilling and completion assets, a strong seasonal rebound in carrier activity and improved results to multiple international markets. The current high demand for higher specification drilling rigs also strengthened demand for Canrig products, particularly in third party sales. The above improvements were slightly offset by a seasonal reduction in Alaska. We also had weaker than accepted revenues in production services simply due to a single major customer cutback in the California market and to used work over activity. Third quarter operating income increased by over 50% to 203 million with margins improving by nearly 300 basis points and EBITDA was approximately 490 million, up 18% versus the second quarter. We are also announcing nine significant contracts for newbuild and substantially upgraded rigs. The awards are for rigs in our…

Thank you, Tony, and good morning, everyone. Our third quarter results were marked by increased activity and improved operating margins in almost all of our segments. The quarter also included certain items related to strategic alternatives that we’ve excluded from our adjusted earnings. In addition to being non-operational and linked to large transactions closed during the quarter, although we expect to close by the end of the year, these items also distort our operating results and their comparability over time periods. The largest items are related to our upcoming transaction with C&J Energy Services. First, we incurred $13 million in after tax expenses principally related to fees for investment bankers, legal counsel and accounting firms. Second, during the quarter, we restructured various legal entities for our completions and productions business in preparation for the merger. The restructuring generated tax charges of $63.3 billion during the quarter, of which the majority, approximately 58 million, was non-cash. Offsetting these charges, we generated a $17 million after tax gain from the divestiture of our Alaska E&P business. The net impact of these items was a 20% reduction in our earnings per diluted share. Income from continuing operations excluding the above net charges was $116.3 million or $0.39 per diluted share compared to 74.2 million or $0.24 per share excluding charges during the second quarter. For the third quarter, included in our adjusted earnings, we had four other items of note that help explain the results. These items combine for a positive net impact of $0.02 per share as follows. First, we frequently benefit from early termination payments on our drilling contracts. In fact, managing our long-term contracts and ensuring they have teeth is part of our business model. In the third quarter, as mentioned by Tony and as we disclosed last quarter, we…

Thank you, William. Let me finish with a summary of our overview and outlook. First, the global drilling market continues to improve. Yesterday’s announcement of our nine newbuilds once again validates this view. Looking ahead, we are pursuing additional opportunities to add rigs in high spec drilling markets around the globe while also improving utilization of our legacy fleet. Second, we are keenly aware of the current commodity price environment. We have largely restored our financial flexibility and we can react on a number of fronts if market conditions warrant. Third, we are intensifying our efforts to improve our operating efficiency further as our initiatives to prune non-core assets and streamline operations wind down. We expect to identify and realize enhanced revenue opportunities and additional meaningful reductions in our cost structure by the end of this year and into 2015. The third quarter’s results reflect improving execution in our drilling businesses. We are working to extend that standard of performance into an expanding opportunity set. With our efforts in the last few years, Nabors is extremely well positioned to capitalize on those opportunities. Thank you for the time this morning. With that, I’ll take your questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question will come from Ole Slorer of Morgan Stanley. Please go ahead.

I wonder whether you could -- it sounds like you’re just stepping up the rates at which you’re adding your rigs. I mean you added I think quarter-over-quarter or year-over-year to the fourth quarter about 20 PACE-X rigs. How should we think -- could you just recap what you said about the speed at which you will add this new technology to your fleet over the next say medium term run rate?

I think we’ve said that by the end of the fourth quarter we’re going to exit with a four-month drill rate. And right now given where we are in terms of the awards, we're probably pretty spoken up through the second quarter of next year. And we’re obviously going to keep a tight look at it given what the market is and I think we can't really assess on almost a six-month window. I think one of the things in this market that was unique that we have an advantage for is all the lead items are stuff that Canrig produces and therefore it gives us the added optionality. So I think we’re in a good position to maximize that. But as we indicated in the comments, given where things are in discussions, we don't see a reason to adjust down from that yet. So that’s where we are.

Could you talk a little bit about the payback into this environment for that type of an investment?

Roughly we’ve been shooting for 3.5 to 4 year payout basically.

And Ole, with the 15% reduction that we’ll get from next year’s deliveries, clearly that number should improve.

And internationally those numbers are better actually.

So the new investments that you're putting on long term contracts into Saudi Arabia are even better than that?

Yes, sir.

And at what point do you think you’ll see -- I mean clearly you're seeing an improvement in utilization across all the rig classes that you operate. At what point in time do you think it will be some sort of cannibalization where you will touch to displace older rigs? Maybe you can talk a little bit about the returns that you’re seeing on older rigs or older spread and day rates, so any kind of way we can get a handle on it?

Well, we’re just all smiling here, because we thought someone would obviously ask that question right out of the box. So in terms of cannibalization, I mean clearly the mechanical rigs as a class have a limited life and our theory there is just we sort of keep operating them until they’re not effective for an operator. But interestingly, in certain locations the mechanical rigs offer a good value proposition for the operator and especially in certain areas like North Dakota they actually perform real well. we've been operating those rigs up there with continuous crews. And those operators get performance almost equal to a new rig in terms of attrition fee. So, the theory on those is that it's just a small amount. On the SCR rigs, I think our strategy, Ole, has been and you've seen it with what's happening internationally, there is a constant trying to get the utilization up. And if you look at our SCR plus units, which we've taken SCR rigs to make it to function like an AC rig, an SCR plus rig has pad capability. I think the utilization on that is like 86%. So that has great life in it so far and so long in this market. The remainder of the SCR rig, if they're not plus, if they're not pad capable, we’ve been using that as a pool for the foundation for these international deployments like the rigs that are found in Saudi Arabia. And the option today, as I said in this announcement, we will continue to do that and use that at the core. Our customers internationally benefit from that because it creates such types of [indiscernible] market we can use some of the mast structures and take six months off the lead time versus anybody else in terms of getting [indiscernible]. So that's the strategy. And while the rigs that are in the U.S. markets to make them pad, make them AC like with SCR plus and try to get more utilization out of them and mechanical, let's just keep running them till they, as long as they perform useful values to customers.

Our next question is from Robin Shoemaker of KeyBanc Capital Markets. Please go ahead.

I wanted to stay on the rig newbuild side for a second. And in terms of the last few years, I mean, the AC drive rigs have been generally getting contracts, lead type term contracts two to three years. Are those -- is that what you had in the three you signed in the fourth quarter? And in your conversations with potential customers for new additional PACE-X rig orders, is a contract term typically going to be three years or two years?

I think it’s closer to the latter than the former right now. But I will also emphasize though, the rates are very attractive rates. And because we’ve shown with the recent performance of the X-rig is the value proposition to the operator. It’s interesting. Today, everyone is talking about pad drilling, but if you look at these wells, as the operators put more wells on a pad and move to batch drilling, that’s a whole new level of additional sort of drilling efficiency and the extra days are ideally suited to that. So the operators today, as that messages came through more and more, they’re getting more and more attractive to the X-rig as a concept. And therefore that’s helping us get the kind of pricing we need to support the newbuild program.

Also on the 40 contracts that you said expired in the third quarter, 24 renewed with term, 14 well to well. Was the choice of, was that your choice on the well to well contracts or would you have preferred to kind of have term contract extensions on all of them?

Well, between having term versus not having term, I would be remiss if I said I always prefer term. But the question also is kind of at what rate and we're not going to necessarily walk in term contracts at low rates either. So there is a balance and some of those reflect that kind of balance in terms of where people wanted to go versus what we’re willing to do. So, that’s what I would answer.

So just in the current environment obviously with the weaker oil price backdrop, do you see any information of your customers to sort of want to shorten up the contract length on either a renewal or a new term versus what they might have wanted a year ago?

I think that’s clearly a topic of consideration by them. I think they have to measure against the drill program and understand how long their commitments are because it cuts two ways. It's just before [indiscernible] going to be a couple of years and I think they're all realizing sometimes it makes more sense to go longer. But yes, in some cases, obviously the operator wants to minimize his obligation as much as possible. But I would say that the rollover -- even in the spot market the rollover rates have been very healthy, reflecting generally the demand we’re talking about.

Our next question is from Angie Sedita of UBS. Please go ahead.

So Tony, based on your comments, I guess if you can elaborate $80 or low $80 oil prices. You’re obviously seeing very good demand on the PACE-X rig so far. Do you think at these low $80 prices that we’ll still see that incremental demand for these rigs to come into the market in 2015? And if so, where do you think that starts to slow on the commodity price side?

Well, obviously, we watch the commodity price with great interest because they’re a key driver to the operator's cash flow. I can’t predict the commodity price. If I could, I wouldn’t do the [indiscernible] in the futures market. So I'd get rich that way. So, this is a lot harder work. But we do listen to our customers. And we actually recently just did a survey of 19 customers in today’s environment and about 85% of them said they see today is steady to increases in their current program. So that’s the shorter answer. As of a week ago there is obviously many of the customers who are in budget talks right now and I think they’ll be reassessing. I think generally people are always looking for the ADS sort of a number. That’s a kind of level or a number that things break below $80. I think what then might happen is you may not see utilization affected as much as operators' focus on cost and trying to [indiscernible] their projects in terms of returns and real focus on drilling efficiency and putting out, probably trying to squeeze more out of oil service companies. That from my point of view, as a Nabors specific, I think we’re probably more prepared for that today than before, because as I said, our new X-rig platform is ideally the kind of tool they need to get that drilling efficiency on their high rate of return projects. So I think that should actually at the moment help drive work to us. The other point I’d make, at least Nabors specific is, I mean many of you have done an analysis of kind of breakeven where you get concerned about rig counts by region. And so I’ll just give you some statistics on that. So in the Tuscaloosa marine shale, we only have two rigs operating, one is on a term for close to two years and one's on a well to well, so that one is exposed. The Mississippi line we have no rigs operating. In the Permian we have no rigs that are drilling vertical wells. In the Eagle Ford we've got 20 rigs operating and 20 rigs doing it on term or they're not tier three. And in the Bakken we have 57 rigs operating, 50 of those rigs are either on term or not in term three, tier three. And the remaining seven rigs running AC with [indiscernible] packages, one is an SCR plus with a skip system, one is an SCR and two are mechanical. So, during the past year or so, one of the thing we try to do is only invest in a proper platform, but also think about the opportunities where we want to be working and we think we’re pretty well positioned now to – where we can't eliminate the risk, but we can try to do our best in the market. So that’s part of our thinking.

So, we’re already seeing the high spec newbuilds see a little bit of flattening out on the day rates, but you were seeing -- you have been at least seeing some nice move in day rates or even your legacy rigs, the mechanical rigs and the SCR rigs. What are you seeing on that side here in Q4 and then your thoughts that this is [indiscernible] all flatten out in Q1 given current commodity prices and the delivery schedule or just give us a little color there.

I think currently given the demand and given where we are on the pricing and the overall value proposition on the X-rig in particular, we haven’t seen any real push back on the rates. The rate is in the high 20s. And the SCRs and spot rates are both running over at good rates right now. So we really haven’t seen the push back yet. And as I said, people are in discussions and I think there is a lot still yet to be worked out in the system. But it hasn't happened yet.

And then finally on Saudi, I think it was very interesting to see you're here that you think there could be some upside to the orders. So could you give us a little color there?

The market there, as you know, they have a clearly ambitious program to increase their rig count. And I think the orders that we just got, we got some other contracts discussed on as well. I think if they follow through on that, there is quite a number of additional rigs if they need to satisfy. And I think the neighboring countries as well there is some opportunity for additional rigs as well. So we’re still very keen on expansion opportunities in both Saudi and its neighbors.

Our next question is from Kurt Hallead of RBC Capital Markets. Please go ahead.

I was curious on the international outlook. Nabors has had some struggles in the past with timing and another things that kind of push the positive outlook going forward. Looks like the current dynamic is quite a bit different. Just want to get a sense from you as to how much confidence and conviction you have in the execution on these international contracts and the timing going out into next year?

Well, I have really first born, second born and third born all under my desk chained. So, I think we're keenly aware of those executions in the past and so we’ve done a bunch of things to try to address them. First of all, we have – we announced these common engineering rules and the common engineering rules actually have some abstract of a new project management team, everyone has gone through project management training and all these new deployments are all being managed by a partner official project manager and that’s who has helped us getting the kind of visibility into the project and helped us really manage it. And that's one of the reasons why the Saudi Arabians are going much better than they have in the past and that was institutionalized now. So I think that’s a good thing. I think the other thing is we have lot more visibility into Nabors' assets given that reorganization and in terms of [indiscernible] we just spend a lot more time on the procurement side upfront in terms of maximizing our clout as the largest provider of everything. On the drilling side of things we’re still the [indiscernible] even prepared to [indiscernible]. We've got more everything than anybody. And so I think clearly that's what our [indiscernible] advantage is also one of our priorities. So the other issue is, it’s still the culture here of not hiding away from problems and trying to get them on table quickly and address them, because [indiscernible] I think that culture is now getting to the company here and I think that’s... So it's delicate in the international business, these tax formalities. I mean a customs issue, a labor union issue, even the NOCs have their own peculiarities and stuff, all of which results in delays and the accounts issues, you have a whole bunch of issues and I can’t eliminate them. What I can do is have our guys try to think about and do the best we can to playing around them and hopefully you’ll see better performance there. And that’s the mission and I can tell you it’s a priority to addressing it and we’ll see how well we do as the next few quarters continue.

Our next question is from Marshall Adkins of Raymond James. Please go ahead.

I just wanted to follow up on Kurt’s question. Obviously you have improved the international side significantly this last year. I want to get some insight into next year. How much an improvement can we see through '15 on the international side?

Well, I think there should be meaningful improvement. If you try and find out the number, I am not going to do it, Marshall. We’ve already anticipated that question that you were going to be the one who try to get their number out of us. But I mean there should be meaningful improvement as all these things start up on January. And I think the only issue is all bad things have happened internationally. And so, the robustness of how big that incline is and how soon it kicks in is subject to that. But starting in January, that should happen when the Saudi rigs get a roll-on on day rate and we know that it’s all done, that’s the first step. The Mexico platform rig gets in -- I think the two Mexico pipeline rigs get on payroll in the first quarter. So by the end of the first quarter, those things should be humming. And each of those should be pretty meaningful steps as we march forward from where we are today. So I do see a meaningful increase in today’s number as far as operating income.

Yeah, that’s all I was getting at, because it does seem like there is a lot of things that are in place, pricing and contracts and whatnot that it is better year-over-year despite coming off of a pretty darn good improvement this year.

Yes, it’s exactly right.

Should I worry about contract rollovers through the year? Is that a risk to the international side?

I think most of the rollovers, at least right now they’ve been positive, they haven’t been negative. So, that’s the one that -- the good things about the market right today. I mean most of the NOCs that are in the game now, they’re going to need access to the equipment and the rigs. And today’s -- one thing that’s occurred is part of the last few years under-performance was due to the fact that, as you well know that those term contracts that were under [indiscernible] in the lean years of '09, '10 where the days rates were very super suppressed. So, as those things roll over and they get close to a staged market rate on the rollover, there is actually uplifts on most of them today as opposed to the other way. So, generally, we’re looking at rollovers as an opportunity to improve our position as opposed to something that’s at risk right now.

That’s good news. Last question for me. The Canrig stuff, what type of equipment -- it seems like there is a lot of third party interest here. What type of equipment are they buying and what percent of that business is outside -- is not captive for you right now?

So, about half of the business is not captive. But let me -- I’ll just go slow with you. Chris will talk a little bit. We have top drives for this year, we’re already in the backlogs that I referred to. We really have orders for top [indiscernible] for next year 10% above of our total that we’re expecting to building this year, just to give you an idea. So, but he'll talk about the quoting and the backlog and what we're doing there.

So, it’s about a 50-50 split. We’ve added, over the past few years, products in addition to the top drivers. So some of these are coming across as packages, and the package can be a driller's cabin power house, all the controls, the top driver wrench, a catalog and the draw work. So those are becoming more meaningful pieces of the overall revenue just because the package is much, much bigger. And so, we're seeing demand really across domestically and internationally in that third party customer base.

And also given -- we’ve been asked for a while. I think Chris, a couple of months ago, he had his draft number 1,000 top drive, so he had a 3 million strong base of customers. And I think one thing,opportunity is to focus on was the existing customers in terms of [indiscernible] previous cycles and I think it's about 500 third-party top drivers in the marketplace, something like that. And so, now you've got customer base and taking care of it. It’s now a meaningful exercise [indiscernible] areas in the growing mode that wasn’t something that you could do, whereas today it’s kind of a new focus area for them. So it's all good, I would say.

Our next question is from John Daniel of Simmons & Company. Please go ahead. John Daniel - Simmons & Company International: Just a couple, first as a clarification. You mentioned the drilling operating income is expected to improve in Q4. Is that an improvement over the Q2 results 218, which includes the $39 contract termination payments?

[indiscernible] is out. John Daniel - Simmons & Company International: And so an improvement of call it 170-ish, okay. [Multiple Speakers] I know. But I am just trying to understand was it inclusive or not inclusive?

Yes, the $0.37 number. John Daniel - Simmons & Company International: Okay. Got it. The other question I've got is related to the newbuild awards. So you've got 43 awards on PACE-X, of which 28 are deployed. That’s 15 that are on construction, seven get delivered in Q4, that’s implied eight for 2015. But at the same time, you mentioned that you’re pretty well spoken up in terms of the construction pace. And I am just trying to – when you guys talk about building forward per month or under that cadence, is that just PACE-X or is that the PACE-X plus the international newbuilds and upgrades? Just trying to understand.

No, it’s PACE-X, but the numbers that are announced are actually totally signed contracts, whereas we also have a huge number of things that haven't been awarded and are still in the documentation phase. That's the gap that you're looking at. If you look at the first two quarters, that’s what makes it up. So we’re real concerned about this issue. John Daniel - Simmons & Company International: And then the last one for me is the comment you made about the work over business, the increase in inquiries for 24-hour work. Is there a way you can help us quantify that level of materials? Is it inquiries of material, because it seems like the seasonality hours are going down. That’s perhaps the inquiries for 24-hour work.

I will have to give you some color on that. The one thing I noticed, notwithstanding the weather related issues and the single merger customer, if you look at the rate, the rate actually increased a little bit quarter to quarter. But actually it did go down for those two reasons. So largely [indiscernible].

Right. John, and the 24-hour rigs, we put out a number in the third quarter and we see -- obviously we’re looking out trying to look forward. We expect to put out a number more of those rigs. There is a demand there for the larger capacity rigs.

Operator, since we’re approaching the one hour kind of time limit, well let’s just one more question and wrap up the call, please.

Our last question is from Brad Handler with Jefferies. Please go ahead.

Let me follow up on the production services side to just for me perspective, please. So you’ve got roughly a quarter of your 445 work over rigs, 500 horsepower or larger. Is that the kind of pool that we should be thinking of that are capable of doing the 24 hour work or is it a smaller pool? Just some perspective that way would be helpful.

There are a number of the 500 horsepower rigs that are on the 24 hour operations. But we also have some larger mass size rigs which are in the 600 horsepower plus range with the larger mass capacity that we’ll deploy into those operations, and these are the ones that have been put in just recently and we see further rigs in the fourth quarter.

Then an unrelated follow-up, if I may. Maybe I missed some of this, so forgive me if I am asking you to retrace steps. But beyond procurement and the engineering related cost savings on the PACE-X, I think you’ve made reference to identifying further cost saves or cost savings by the end of this year. Have you told us about those or maybe I just missed it or if I have forgive me. But can you identify where you are identifying these cost savings even if you can’t quantify it yet?

I think we have a bunch of internal initiatives out there. There are people related costs and we have another initiative that’s on revenue enhancement, showing to the operator for example the 310 rig products, upgrade products that’s available, and so between those things we’re focusing on additional margin between those two things.

And we continue efficiently on the cost of the PACE-X of course. It’s going to be our biggest investment next year, so we will try to go incremental cost reduction around 15 that’s been achieved by the two as well.

And then as we get closer to year end, you’ll be able to identify kind of the people related stuff or is that a fourth quarter call conversation, do you think?

I'd love to say fourth quarter call, because hopefully the numbers will be apparent one way or the other. So, we’ll comment on the fourth quarter earnings. We won’t do a special call for that, if that's what you...

I just figured, yeah, that’s perhaps on the earnings call that would have been identified as part of your target I think for '15 on what the cost savings are for next year.

That’s right.

And this concludes our question-and-answer session. I’d like to turn the conference back over to Dennis Smith for any closing remarks.

Thank you, Emily. And I want to thank everybody for participating today. We apologize if we didn’t get to your question. Or if you have questions you want an answer, feel free to call us or email us and we’ll get back to you as promptly as possible. Thanks, again.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.