Good morning, and welcome to the Nabors Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Denny Smith. Please go ahead. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Good morning, everyone, and thank you for joining Nabors' earnings teleconference to review our fourth quarter results and full year. 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 results along with some insight into what we are seeing in our markets and how we expect Nabors to perform in these markets. 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. One, if you're participating by webcast, they are available as a download within the webcast. Alternatively, you can download the slides from within the Investor Relations section of our website, nabors.com under the Events Calendar submenu, where you will find them listed in Supporting Materials under the conference call listing. Instructions for the replay are posted on the website. With us today, in addition to Tony, myself and William, are Laura Doerre, our General Counsel; Siggi Meissner, our Head of Global Drilling operations; and Chris Papouras, President of Nabors Drilling Solutions. Since much of the commentary today will concern our expectation of the future, they may constitute forward-looking statements within the meaning of the Securities and Exchange Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risk and uncertainties, as disclosed by Nabors from time to…

Thank you, Tony. And thanks everybody for joining us today. The net loss from continuing operations attributable to Nabors for the fourth quarter was $161.9 million, or $0.57 per share. Excluding asset impairments related to the current market downturn equal to $101.2 million after tax, the net loss from continuing operations was $60.8 million, or $0.22 per share. This compares to an adjusted net loss of $40.8 million, or $0.14 in the third quarter. Included in the fourth quarter loss was our share of C&J's earnings with a one quarter lag. In effect, a loss of $45.4 million, or $0.16 per share, as compared to the C&J loss we recorded in the third quarter of $35.1 million, or $0.12. Our core businesses excluding impairments and the impact of C&J delivered a loss of $0.06 per share as compared to $0.02 in the third quarter. The industry environment continued to deteriorate in the U.S. market beyond what we had anticipated at the end of the third quarter. This deterioration affected the marketability of our assets and required additional impairments in certain categories. These impairments of $123.6 million pre-tax, affected predominantly our SCR rigs in the Lower 48, certain jack-ups in our Canadian rigs and Canrig's inventories. Continuing with our results, revenue for the quarter of $739 million decreased by $109 million, or 13% sequentially. Revenue in our International segment decreased sequentially by 13%. During the fourth quarter, two of our platform rigs in Mexico went off rate as previously anticipated. Our revenue in the North American drilling market fell by 15%, driven primarily by the 13% fall in rig count, and weaker pricing in the Lower 48, although the revenue per day held up well as a result of a more favorable mix in our working rigs. The Canadian high season…

The first question comes from Marshall Adkins of Raymond James. Please go ahead. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, guys. First of all, thank you for the frank comments about the industry outlook, and my first question is just a little clarification. I believe you had mentioned all the stuff leads you to roughly a guess of a 25% reduction in rigs from here. Just curious, what base are you going off of? Like the most recent week where we're at 540, or is it a higher average? Or maybe easier to answer is, how low do you think we get on the rig count, given what you know today? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. I mean, when we did the survey of the customers, everyone has a slightly different starting point. So I would say people, the numbers – conversations were had in the latter weeks of January, so that kind of number is where I started from. So from today's count, it would imply something, at least another 10%. But also bear in mind that 35% of the people we surveyed are probably amongst the stronger people in the marketplace, and if borrowing base redeterminations occur, it could get worse. So that should give you some sense of where we are. J. Marshall Adkins - Raymond James & Associates, Inc.: Makes sense and I would agree. Second question I have is really the broader issue of labor, This is as bad as I've seen it in this industry, and I've been doing it a long time; obviously wages are getting whacked, people are getting whacked across the board. How hard is it going to be to re-attract those people to the business, and are you going to…

The next question is from Jim Wicklund of Credit Suisse. Please go ahead. Jacob A. Lundberg - Credit Suisse Securities (USA) LLC (Broker): Hey guys. This is Jake on for Jim. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Hi. Jacob A. Lundberg - Credit Suisse Securities (USA) LLC (Broker): I Guess first is to start off, could we get some color around what spot market day rates look like today? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Sure. Let's see here. So, obviously they vary by class. I would say that the super premium rates are in the mid to upper teens and rates range below $15 for older legacy rigs. And as for pricing pressure, if the industry rig count declines, the market clearing price will follow suit. I will describe the prices as steady but certainly not in freefall and so that's probably how I'd characterize it right now. Jacob A. Lundberg - Credit Suisse Securities (USA) LLC (Broker): Okay. And then continuing on that, what sort of spot market day rate would you need to see to consider building, starting a newbuild against a term contract? And then kind of along the same lines, maybe premature to think about already, but what metrics do you look at or how do you guys think about pricing power in a recovery? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, I think in the mid-20s basically would be a rate we'd like to see for newbuilds against the contract that would ensure us an adequate payout. We'd like to build with a target of three-and-a-half year to four year cash payout on investment that translates into a high-teen return. If everything works out the right way, so that's kind of our…

The next question comes from Chase Mulvehill of SunTrust. Please go ahead.

Hey, a couple of real very quick questions. I guess on the first one, follow-up on the Lower 48 term coverage. So if I do the math right and you got roughly mid-30s contract coverage for 1Q. And you know assuming that you're getting $11,000 or so a day on your term contracts, that implies about a breakeven contribution margin for the spot rigs. Is that what you're assuming to get your sub $7,000 per day gross margin? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. I think what we're assuming is that, first of all, when we roll from the fourth quarter, there's certain adjustments you have to make out of the box like taxes and the FICA as well as some workers' comp benefits in the first quarter. And that alone out of the box is about $1,500 a day. And then the question really is, how much deterioration is there in the gap between the term coverage and the spot rates going forward. So, that number we talked about represents – the conservative guess is how much that decline is going to result as the spot rates continue as a portion of the overall mix of rigs. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: The spot rigs are not at zero margin. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yes.

Okay. All right. I will have to run back, do the calculation. And then – so thinking about your commentary around positive free cash flow, can you confirm that this does not include any benefit from working capital or taxes? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yes, sir I can.

Okay. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Taxes, when I say free cash flow, I'm including cash taxes as a cash outflow. So, in other words, I want my free cash flow to cover basically my CapEx, my interest expense, and my cash taxes, and my dividend.

Right. And so, doing the math on that implies – am I getting this number right, a targeted EBITDA of roughly $750 million for this year? Anthony G. Petrello - Chairman, President & Chief Executive Officer: That's the range. You can do the math.

Okay. All right. I just wanted to confirm that, make sure I wouldn't miss anything. All righty, I'll turn it back over. Thanks, Tony. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Thank you.

The next question comes from Ole Slorer of Morgan Stanley. Please go ahead. Ole H. Slorer - Morgan Stanley & Co. LLC: Hi. Thanks a lot. And, yeah, so much focus is clearly on the balance sheet at the moment. So, just to clarify. So, you have $1.2 billion of maturities through 2018, which should be no problem in context of your $2.25 billion availability on your revolver. You said there are no covenants on that revolver other than 60% debt to cap. So, if you get downgraded from the current BBB minus, there's no impact on availability of the revolver. Is that correct? Anthony G. Petrello - Chairman, President & Chief Executive Officer: It's correct. That is correct, sir. Ole H. Slorer - Morgan Stanley & Co. LLC: Okay. Thanks. Just wanted to clarify. So, there should be quite a big financial safety net if the interest rates should turn out a little bit worse than what you're modeling here in your base case for 2016? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, I'm modeling a case where hopefully I won't have to use the safety net at all in 2015, that's my mission. So, I guess, what I'm trying to emphasize is even if I do need it I have a pretty large safety net. Just anecdotally, I'd tell you that all the colleagues in every investment bank have been walking around interviewing people about how to shore up balance sheets and I cannot say that everyone that's coming to see us, they're struck by the amount of liquidity we have relative to the size of company we have. No one frankly can believe the amount we actually have. So to their chagrin, because that makes the opportunity for them to enhance is pretty…

The next question is from Jud Bailey of Wells Fargo. Please go ahead.

Thank you. Good morning. Wanted to ask about the international market commentary. I guess, first of all, the increase in margin per rig day from 4Q to 1Q, does that include any type of renegotiation for lower rates like you did earlier in 2015, or is that assuming all your contracts under current terms stay in place? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, we had a fair amount of ups and downs in the fourth quarter, which I think account for some of the margin deterioration you saw. Just to give you an idea. I think we had 11 rigs go down and four rigs come up. And our current view for the estimate of the first quarter is a result of post that, the margin mix, and what we have left are pretty good margin, returning us back to the pre-fourth quarter level. That's basically the thinking. And it accounts for what we see right now. As we look out – obviously, the visibility is low. On the other hand, we do have a very substantial contract backlog and we have a pretty good market position here. So we're pretty comfortable, at least looking at the first quarter that that's going to be where we end up.

Okay. Thank you for that. And then, I guess, just looking beyond the first quarter in terms of – for the international markets for both your rig count and margin per rig day, as contracts roll, can you at least help us think about contract mix in the context of how to think about your margin per rig day for the balance of the year as more rigs come off contract and others presumably may start up? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. Well, I think we've said – we've indicated we thought there's about a 10% drop in rig count going into next year and maybe over the course of the year. It really depends on how much more this macro climate continues. Obviously, the lines of communication are open to all the NOCs, they know what's going on in the U.S. and they're feeling their own pressure and there's constant price pressure, et cetera. I don't see the kind of clear scenario that you have in North America occurring international, so there could be some gradual further deterioration, but we don't see anything at the moment falling off the cliff anywhere.

Okay. And does margin in that scenario, does margin per rig day then start to trend down in the back half of the year? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, I think, like I said, the current visibility is at the level that we talked about and maybe over the course of the year depending on how the macro effects and what the success is, there could be some pressure. But again, there's nothing in stock right now that materially takes that off of cliff either.

Okay, great. Thank you.

The next question is from Scott Gruber of Citigroup. Please go ahead.

Good morning. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Good morning.

I want to stay on the international side, just following up the last line of inquiry. If you can provide any additional color on the levers that you can pull on the international side, help offset potential rate deflation, either via the concessions or contract roll? I know you guys have exited some countries and are relooking at your footprint. I'm sure you're looking at things at the rig level. But what levers are out there that you can pull to try to offset the rate deflation? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. Well, the kind of effort that you see we've put into our corporate infrastructure, that's one of our targets in this year to do the same thing internationally. Internationally, it's orders of magnitude more complicated because you have operations in more than 20 countries and to optimize – there's only so much you can optimize in each individual country, so you have to look at other ways to optimize across a region, et cetera, but taking more costs out of that system is high priority. The other issue is with our new reorganization, we have much more clear visibility as to our global asset base. And so reductions in maintenance costs and sustaining capital is a high priority for us. That's in part reflected in the numbers we've now quoted you for our CapEx objectives for the year. And similarly, the same thing on inventory, is to consume as much for what we have in our pipeline, floor (46:11) down as much as that, again with the view of saving cash. The vendors we've hit pretty hard in North America. I think we're also trying to figure out which vendors internationally we can make participate in the pain. And so there are a bunch of things in the process that we're focusing on, all with the goal of trying to ameliorate any further deterioration that we think could happen.

Got it. And then turning to CapEx, I think you mentioned that half of the CapEx this year is maintenance. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yes, sir.

As we think about next year, and I know it's a little early to do so, but when you think about 2017, do you have any International CapEx commitments above and beyond maintenance, or can we think about the other half of CapEx, anything beyond maintenance next year being at your discretion? Anthony G. Petrello - Chairman, President & Chief Executive Officer: I think there's just – yeah, just one project in Kazakhstan...

Unfinished in Kazakhstan. Anthony G. Petrello - Chairman, President & Chief Executive Officer: But we kind of stopped, maybe by some read of (47:08) Kazakhstan into the – early next year, but other than that there's nothing really committed.

Any color on the size of that impact?

It's a rounding error. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Perfect.

For 2017?

Yeah.

It's sub $10 million (47:26). Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah.

It's exact by the way. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah.

If we finish on time, it should be zero. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah.

Got it. Thank you.

The next question comes from Marc Bianchi of Cowen. Please go ahead. Marc Bianchi - Cowen & Co. LLC: Hey, guys. On the International side, you've got, it sounds like, a few rigs rolling off, perhaps mix improving there, but can you talk about sort of where the mix will be once everything sort of resets for what you can see right now in terms of geographic exposure? I think also, you've mentioned in the past that a large portion of what's working in the Middle East is going after natural gas. Just curious to hear some mix exposure there, if you can. Anthony G. Petrello - Chairman, President & Chief Executive Officer: I think the basic mix continues, but Siggi, you want to add some color on your... Siegfried Meissner - President, Global Drilling Operations & Engineering, Nabors Industries, Ltd.: Yeah, I think the stronghold is parts in the Middle East and again gas, a lot of gas drilling is the dominant part. That's, I think, we're going to see the ongoing activity... Algeria, North Africa of course. So we continue in those strong markets. The markets we have good stronghold right now is where we continue. Marc Bianchi - Cowen & Co. LLC: Okay. So then is it fair to assume that the rigs that are rolling off are South America? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, there are oil rigs in the Middle East as well. So I think the higher margin ones are gas rigs, but we do have some oil rigs. And so some of those are at risk (48:56). But yes, in South America, probably percentage-wise, the strain is greater in... Siegfried Meissner - President, Global Drilling Operations & Engineering, Nabors Industries, Ltd.: There are some small rigs coming off in South America. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. Siegfried Meissner - President, Global Drilling Operations & Engineering, Nabors Industries, Ltd.: And then some of these project rigs like Kyrgyzstan, things are coming to an the end, right? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yes. Siegfried Meissner - President, Global Drilling Operations & Engineering, Nabors Industries, Ltd.: So that's where you see the drops. But in the core markets, we really don't see a big change. Marc Bianchi - Cowen & Co. LLC: Okay. Okay, great. Maybe just back over to the U.S. and the cost decrease that you mentioned, the direct cost decrease, have you guys been able to reduce labor costs at this point? And that's something, talking to a lot of the other companies in the industry, they were really reluctant to address that because of concerns of losing their crew, but just curious if maybe this is the beginning of starting to address that cost bucket?

So what we meant by reductions in costs, we tweaked our accruals on some of the burden, where we realized we were over-accruing. And also, versus the third quarter where we were actually expecting an increase in activity that then disappeared when the oil prices headed back south, we had some excess labor that we addressed in the fourth quarter. So that's what we meant by reductions. We have, again, looked at things like overtime and some of the 401(k) benefits. We have not touched the salaries of employees at this point. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah, I mean, we have touched – in certain segments, specific segments, there has been some salaries touched, but generally there's been no total wage scale reduction for the people on the rigs. As we have said, the rotation schedule, we play with rotation schedule which does affect over time, and we've also played with the add-ons. There's a bunch of add-ons that's these guys earn. Siegfried Meissner - President, Global Drilling Operations & Engineering, Nabors Industries, Ltd.: Really focused on head count management (50:50). Anthony G. Petrello - Chairman, President & Chief Executive Officer: So we've focused on that as well. So yes, we're chipping away at it, but we haven't – a lot of these guys, a lot of the best guys have already taken pay cuts because we've taken them and pushed their position down. So a specific guy has lost some income, if he was a driller and he got pushed down to another position; or a tool pusher, he got pushed down to a driller. And with the term contracts, I think a lot of people have been reluctant to make direct wage adjustments because that would just – it'd say you're neutral because it's all attached with the operator. So that's why no one's attacked it that way, so you're attacking from all of these different angles instead. Marc Bianchi - Cowen & Co. LLC: Sure. Understood. Thanks, Tony. I'll turn it back.

The next question comes from Waqar Syed of Goldman Sachs. Please go ahead. Waqar Syed - Goldman Sachs & Co.: Thank you for taking my question. William, you mentioned $1,500 a day or so pick-up in OpEx for beginning of the year kind of causes. In second quarter, does that cost $1,500 per day go down?

So that was – again, that was Tony's comment. No, it bleeds down over the year as people max out in some of those, for instance, Social Security, taxes and things of that nature, and health costs. A lot of those things bleed out as the year goes by. So that's why we do expect a fourth quarter to first quarter increase. That increase continues during the second quarter, Waqar. Waqar Syed - Goldman Sachs & Co.: Okay. And Tony, sorry about that, I didn't attribute the question to you, but could you highlight – provide us with some color on outlook for the offshore business and the Alaska business? Anthony G. Petrello - Chairman, President & Chief Executive Officer: I'll let Denny respond about Alaska. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Yeah. Alaska, we've seen, with the oil price drop a lot of cessation of some of the exploration projects and we've had a few contracts that were up for renewal in the field that are going down because of cost constraints. So we look for the rig count to get a little softer, probably down to about five rigs for the year. And rates will probably hold in pretty steady I think as most of the rigs are on contract. Waqar Syed - Goldman Sachs & Co.: Okay. And you do have one... Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Sorry. Waqar Syed - Goldman Sachs & Co.: You also have one rig coming up, right, adding to the fleet? Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Yeah. It won't be in effect till fourth quarter. Waqar Syed - Goldman Sachs & Co.: Okay. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: It'll deploy during the third quarter via the barge to sealift, and then start up maybe September or October probably.

That will be a meaningful addition... Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Yeah.

...by the way, very meaningful. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: A very high spec rig, it's one of our arctic coil tubing drilling units. Waqar Syed - Goldman Sachs & Co.: Okay. And then for offshore? Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Offshore, same story, it's pretty soft. Rates are now under pressure a little bit. I think probably this quarter things are probably pretty steady from where we're at, wouldn't you say, Siggi? And we're still working with the customer on exactly the resolution that they put, and so that may have some upside in the year, but it's not in our immediate forecast. Waqar Syed - Goldman Sachs & Co.: Okay. And then Tony, your investment in C&J, I see at the end of December based on the stock price was $300. Is it the book value of the investment as well?

The book value is based on historical costs and we have taken some impairments on that value. I think we're roughly around $400 million or so right now. Waqar Syed - Goldman Sachs & Co.: $400 million.

On the book. Waqar Syed - Goldman Sachs & Co.: Okay. And then do you have any view on how to protect your investment and how do you think about your investment in C&J?

No, we have – you need to keep in mind, we have two distinct management teams. We have to first of all focus on Nabors first, and I think the management team in C&J is quite capable and quite capable of protecting that investment. We will, of course, give them all the support – logistical, operational and marketing support that they want, but each team has to take care of their own house. Maybe Tony, do you want to comment? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. I think the only thing I would say is obviously we have a significant investment here and we're motivated to see C&J succeed. And as within any investment, we'll act in concert with them to see what's in the best interest of Nabors' shareholders to protect that investment. But beyond that, I don't really have anything else to say right now. Waqar Syed - Goldman Sachs & Co.: All right. Thank you very much. Thanks for the color. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Thank you. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Kate, given that we're approaching the one-hour mark, let's make this the last question please.

Okay. The final question will come from Robin Shoemaker of KeyBanc Capital Markets. Please go ahead.

Thank you. So I just wanted to follow up. You indicated that you had some small amount of revenue from early termination of contracts in the fourth quarter. Could you give us an update, and others of your competitors have reported more early termination notifications in the first quarter, either – and could you just update us on where you stand with regard to that on your U.S. and International contract early terminations? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Okay. We received approximately $1.5 million in the fourth quarter. We're only $200 per rig day. So it really wasn't significant in the delta you saw. That really didn't account for a lot of the increase. And at this point, we're not forecasting any lumpsum early termination payments in the first quarter. Our customers have chosen to stack rigs on rate rather than pay out lumpsum early terminations right now.

I see. So could you remind me how many do you have on stacked on rate currently? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Six, that's six.

Okay, all right. That was my question. Thank you. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Thank you, sir. Dennis A. Smith - Vice President, Corporate Development & Investor Relations: Kate, you want to wind up and close out the call? And ladies and gentlemen, thanks for participating. And then if we didn't get to your questions, feel free to call us any time or email us.

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