Good day, and welcome to Nabors' First Quarter 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, this event is being recorded. I would now like to turn the conference over to Denny Smith, Vice President, Corporate Development. Please go ahead.

Good morning, everyone, and thank you for joining Nabors' teleconference. 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 perspectives on the results, along with insights into our markets and how we expect Nabors to perform in each market. 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're available as a download within the webcast. Alternatively, you can download the slides from the Investor Relations section of nabors.com under the Events Calendar submenu or you'll find them listed in Supporting Materials under the conference call listing. Instructions for the replay are posted on our website. With us today in addition to Tony, William and myself are Siggi Meissner, President of Worldwide Drilling; Chris Papouras, our President of Nabors Drilling Solutions; John Sanchez, our Chief Operating Officer for Canrig; and other members of our senior management team. Since much of our commentary today will be in regards to our forward expectations, they may constitute forward-looking statements within the meaning of the Securities and Exchange Commission Acts of 1933 and 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 differ materially from those indicated or implied by such forward-looking statements. Also during the call, we may discuss certain non-GAAP financial measures, such as adjusted operating income, EBITDA, and adjusted EBITDA. All references to EBITDA made by either Tony or William during the presentations, whether qualified by the word adjusted or otherwise, mean adjusted EBITDA as that term is defined on our website 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. Now, I'll turn the call over to Tony.

Good morning, everyone. Welcome to the call. We appreciate your participation as we review our operations for the first quarter of 2017 and our view on the market going forward. William will follow with a review of our financial results. I will then wrap up, and we will take your questions. First, let me start by saying that the financial results of the first quarter did not meet our expectations. As we noted at an industry conference a month ago, we had two issues that impacted our results. The first one, related to reactivating approximately 20 rigs in the Lower 48. The second, the structural work on rigs in a key international market. This quarter's results do not reflect the success we've had throughout the downturn at reducing and controlling costs. They also do not reflect the progress we've made deploying our SmartRig in the Lower 48 or increasing our drilling rig count in certain high-margin international markets. I will elaborate on the specifics later in the call, but what's important to know is that the majority of these cost items are related to specific issues that will largely be put behind us. We are executing our plans to reduce and eliminate many of these expenses while continuing to grow activity and roll to higher dayrates. With this execution, we expect steadily improving results, both in the U.S. and internationally throughout the remainder of 2017. Now, let's turn to our financial results. In the first quarter, Nabors generated adjusted EBITDA of $100 million and revenue of $563 million. This performance compares to $146 million and $539 million, respectively, in the fourth quarter. Revenues increased across the U.S., Canada, and other Rig Services segments. Revenues declined by just 1% in our International segment, even after significant revenue hits in the quarter…

Good morning, and thank you for joining us today. First quarter financial results did not meet our expectations. First, we experienced higher rig startup costs in the Lower 48, as more rigs were reactivated during the quarter than we had anticipated. But also, our average costs of reactivation went up substantially. Second, the impact of our accelerated asset recertification was moved up to the first quarter in Saudi Arabia, materially affecting our results. Third, spud dates for several of our international rigs (21:43) from Q1 into the second quarter. And finally, we had to take some additional actions on salary and benefit increases throughout our administrative overhead and R&D organizations, following three years of salary freezes and benefit cuts. Going forward, we expect our Lower 48 reactivation cost to decrease in the second quarter with fewer rigs reactivated than in Q1. And we anticipate reactivation costs will decline progressively in the second half as the majority of our incremental rigs will come from new builds rather than reactivations. The asset recertification program in Saudi Arabia is essentially behind us with minimal costs, if any, affecting results during the remainder of the year. Moving on to our results. Revenue from operations for the first quarter was $563 million as compared to $539 million in the prior quarter, a 4.3% improvement. Fourth quarter revenue was affected favorably by $13 million in demobilization revenue, while the first quarter included close to $12 million in lost revenue from the asset recertification program in Saudi Arabia. Excluding those items, the sequential revenue increase for the first quarter was 9.3%. U.S. Drilling revenue increased by 8.7% to $162 million, reflecting 29% higher rig count in the Lower 48, but offset by lower activity in Alaska and U.S. offshore. The Lower 48 revenue increased by 21%, as…

Thank you, William. I want to conclude my remarks this morning with the following summary. We had an unfortunate convergence of two specific issues this quarter that meaningfully impacted our results. First quarter margins were not where we wanted them to be, but we have a clear path to improvement, not just later in the year, but now in Q2. The recertification expenses internationally are essentially behind us. The rigs are back and the fields working. We expect that the operational disruptions resulting from the special project are behind us as well. The bulk of expenses related to reactivation costs in Lower 48, we believe, has now been absorbed. The more measured pace of rig additions along with some steps we've taken are allowing a better controlled reactivation process. Numerous costly rig relocations from one basin to another are no longer required. Higher recruiting and training costs are not likely to go away soon. However, these will be less impactful on margins going forward with our higher operating rig count. We expect second quarter margins will exceed the first quarter's and the third quarter to exceed the second. The Lower 48 market continues to grow dynamically. With the industry's highest-spec rigs at full 100% utilization, we are seeing positive dayrate movement. Clients are executing on growth plans, and our upgrade program is finding the demand expected. Dayrates continue to increase, and our considerable spot exposure allows us higher margins through repricing at current rates. Our International segment has seen stable activity in pricing. With Saudi costs now substantially absorbed, International should exhibit growing EBITDA in the second quarter and increased tendering activity that bodes well for the intermediate and longer term. Finally, our NDS growth profile is on pace with the trajectory we laid at our Analyst Day. These products are allowing customers to drill more efficiently, safely and consistently, and earn a better return on their investment. Going forward, we expect to share in that value creation to a greater extent. That concludes my remarks this morning. Thank you for your time and attention. With that, I will take your questions.

We will now begin the question-and-answer session. The first question comes from Marshall Adkins of Raymond James. Please go ahead. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, gentlemen. William, thank you for your detail on the costs. I just want to come back to that. It sounds like the abnormally high costs in the quarter were a combination of labor, maybe some rig upgrades, certainly parts in the rig moves. Was one of those was a lot more important or bigger than the others, and kind of break down the impact of each of those?

Sure. I mean, obviously, when we started bringing the rigs back, at the beginning, we have plenty of rigs in every single geographical location. But as we moved into the first quarter, the hotter places ran out of rigs, and we had to move rigs from the North, for instance. And I think the average, up moving rigs as you allocated overall in reactivations, they're somewhere in the range of $300,000 per rig. So, that's been the costs – the highest costs really and probably the highest variance versus our expectations. The second thing is, as you probably know, the more a rig fits, the more its inventory stock, which I mentioned to you, we're in the range of $500,000 per rig, gets used by the active rig. Obviously, it doesn't make sense to leave those inventory stocks sitting when you have other rigs that could use them. So, over time, those get depleted. And obviously, you don't deplete them all, but you have to spend more money to put those stocks back into the rigs. And we do expense those spares as we buy them, not as we use them. So, that has an immediate impact on our results. And then, of course, the longer a rig works, some of those certifications run or expire, so we have to do some inspection work. And that may lead to additional repair work, so that – those are some of the major components. I mean, compensation also played a part. But if I were to rank the costs, I would say that the highest was moved, followed by repairs and restocking. And then, finally, comp is the smallest amount. We think that the average that we're spending is in the range of $700,000 per rig reactivation. But some of them cost more than that, of course, depending on how much we had to spend on the move. J. Marshall Adkins - Raymond James & Associates, Inc.: Sure, all right. Well, that helps. So, it sounds like what we're doing is bringing forward a lot of the costs. I didn't hear anything in your commentary that dissuades me from the same outlook in the back half of 2017 that I would have had before today. Is that fair? I mean, is the outlook looking out to the back half of the year changed? Or am I correct in assuming that we just brought all of these costs forward?

There's a couple of things that has surprised us, of course. I mean, the number of rig reactivations we have had to dephase so quickly, so 40 rigs over the past two quarters. So, yes, the cost – that has boosted up – and the cost, and you see the average margins that we have, we easily have well over $1,000 per day being absorbed by the rigs that are working. So, that's one thing that should dissipate over the second half of the year. But the other surprise is, of course, the rigs are coming quicker, so we expect in the second half of the year a little bit more volume overall than we expected before. And we are seeing a little bit better pricing than we were expecting before. So, those things surprised us for – to our previous anticipation. J. Marshall Adkins - Raymond James & Associates, Inc.: Right. So, net-net, the back half is as good or better than we would have thought a month or two ago?

I believe so.

Yes. In particular, the U.S., Marshall, as you saw from the survey we did, just lends some credence to the fact that things seem to be continuing on track here. And as you can see from our numbers already, we're looking, in the second quarter, at almost 95 average (43:27) almost 15% increase in rig count in the second quarter. So, I think U.S. for sure, I think, look on track. Internationally, the dynamic is such that the second quarter, we are going to have we believe a couple rigs incrementally. And that sets us up well for the second half of the year. As we said, we have some caution about the OPEC cuts and continuation – and what's going to happen there. But at worst, that's a push to the right. And at best, there's more tendering opportunity that will, in fact, be realized that we've been talking about. So... J. Marshall Adkins - Raymond James & Associates, Inc.: Well, that was going to be one other follow-up is your international outlook seemed a lot more bullish than most everyone else we've heard. Everyone's kind of guiding down international and talking about how it's very slow. Yours seemed a little more upbeat. You're getting a lot of bidding. Just give me a little color on that, if you would, on why you're, I guess relative to others, a little more optimistic on the International side.

Well, I think just going into the second quarter, we think the – we're pretty confident the average rig count is going to go up in the second quarter based on where we are right now. J. Marshall Adkins - Raymond James & Associates, Inc.: Well, you would know because you're negotiating it now.

Absolutely. And so, that looks pretty good. And then, the third and fourth quarter looking out, there is activity that's in the pipeline for places like Algeria, Kuwait, Oman, Russia, and Argentina. And the question is, do those things get, in fact, get closed or is there any reassessment given what's happened? I would note that part of the drop, as William referred to in the financial (45:22) for this quarter were some of the rigs that are going on in second quarter, we thought, will actually get there in the first quarter, so they did get delayed. And so, there is that possibility, some of the stuff gets (45:20) delayed. But I think what's important here is the stability of our base. I mean, if you look at the quarter-to-quarter numbers, fourth quarter to first quarter, I mean, once adjusted for the Saudi special circumstance, you can see the firepower of the revenue base that we have today. I mean, we're still generating incrementally at a rate that went up actually quarter-to-quarter as compared to most people. So, we do feel pretty good about the stability of the base. But the growth, I think, we'll see in the second half how things turn out.

And by the way, I think some of the other feedback we're getting from some of our peers about international is significantly affected by offshore activity and Far East activity where we're not present currently. So, we do serve a different subset of geographies than, say, the Schlumbergers, Halliburtons, and Baker Hughes. J. Marshall Adkins - Raymond James & Associates, Inc.: Right. That makes sense. Great, guys. Thank you all.

The next question comes from Blake Hancock of Howard Weil. Please go ahead.

Thanks. Good morning, guys.

Morning, Blake. How you doing?

Doing well. On the international comment that we just kind of walked through, of things getting pushed to the right, I guess, Tony, last quarter, you kind of ventured to say that you thought maybe international EBITDA in 2017 could be on par, if not better than 2016. I guess kind of given what we saw in 1Q and the guide here for 2Q, it's probably fair to say that it's probably off the table, at least, for the time being. Or can you just help us how you guys are thinking about that now?

Yeah, it's going to be a reach, obviously, given where we're starting out, and so, I would say that. On the other hand, I'd also say that in terms of the base, the base is looking pretty good. And as I just said to Marshall, I think there are some prospects of incremental activity, similar to what's happened in the second quarter and the next couple quarters, whether that's going to be sufficient. I think before, we were thinking it would be more than moderate both in third and fourth quarter. But maybe that's been pushed to the right now, given what their overall macro.

I mean, it's fair to say, Tony, that there are some – in some of these countries, we have – I mean it can respond very quickly.

Yeah.

So, it could be very quick impact.

Okay. No, that's great. And then, I guess, as we think about kind of the SmartRig and the base cost structure of that rig, can you help us think about just a daily op cost? Is there a change versus kind of a more standard AC rig using the SmartRig? Historically, call it, $13,000 a day or so. Is there any change there as we think about – as we look at normalized margins and cost within the Lower 48?

Our mission as a company to make all the smart features part of the base infrastructure of the rig. And so, we're working hard at making sure that happens. And if there is a difference, the delta is very minimal. So, that's the whole concept of the approach here. And obviously, the mission of the SmartRig is actually to drive down the overall – or drive up the overall efficiency, and hopefully that results in some other cost savings, at least to the operator, which should benefit us. So, the answer is the whole model is designed to not layer a whole other set of costs on it.

That's great. I appreciate it, guys. Thank you.

The next question comes from Ken Sill of SunTrust Robinson Humphrey. Please go ahead.

Good morning, guys. This is Terry Starling in for Ken. My question is more on – also on the international front. With the JV set to start in the Kingdom in the second half of this year, how would that be impacted with the OPEC cuts? Is the JV immune to any sort of cuts? Or is it – could we see it be pushed back?

I wouldn't say it's immune. I think it's – but I would observe that our 50-50 partner is going to be Saudi Aramco itself. So, you can draw your own conclusions as to how that might have turned to some thinking, but we're obviously not immune to the cut. And we're going to be subject to all the same market forces. And it's up to us to do a great job, to show them the value that in a downturn, we're still producing. So, there're certainly no underlying security from cuts – from effects of the OPEC cuts from the structure. But as I said, having them at the table as a partner, I think, is very useful.

Okay. Thank you. That's a good way to think about it. Thank you.

The next question comes from Jim Wicklund of Credit Suisse. Please go ahead. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Good morning, guys.

Jim, how you doing? James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Well. Thank you. The overreaction to your stock is extreme today, but then – down 2.5%, hell, everything goes to hell. With new contracts being signed at $19,000 and above, one would have to believe that over time, if this rig count holds up, then your margins, which have been below everybody else's for a while, should really start to roll up by the end of the year. And so, I'm kind of curious, are we signing term contracts? Are you basically all on spot? Because if you're on spot, you'll get there a lot quicker.

Yes. Well, I think that is an excellent point, Jim. I think the point we probably didn't make sufficiently clear that you've uncovered here is that the average dayrate of portfolio is less than the spot of the contracts we're now signing. So, that, by itself, means that's going to start to drive up our margins. And in terms of where those new contracts are, about 75% of our contracts are either well-to-well or expire next six months. And therefore, gives us great opportunity to do that. We are not locking in rates. We are not locking things long term unless – we really are not locking in long term, I can say right now. So, we have an ample opportunity to push the rates up. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): So, by the end of this year, your margin profile could be very, very different from Q1, right?

It could. It could.

Yeah.

It should be, is the way, what we'd like to say it. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Okay. And everybody talks about super spec rigs and how many upgrades we can do to get to super spec rigs and Helmerich & Payne's actually putting walking systems on their rigs. So, the world has obviously changed. Do you really see that big of a difference going forward between the super spec rigs and a 1,500-horsepower AC rig with a half-pressure mud system? I mean, I guess for a super spec, you have to have all the boxes checked. But is it really that big of a dichotomy in demand out there today?

I think the demand is a huge dichotomy, absolutely huge dichotomy in terms of demand. And in terms of rate, I think the rate difference between $1,500 and $2,000 a day today, and I think that difference could expand in the future. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Okay, perfect. Guys, thank you very much. Appreciate it.

Thank you, Jim.

Andrew, we're down to roughly five minutes. Let's take one more call, and wrap the call up, please.

Okay. And that question will come from Ole Slorer of Morgan Stanley. Please go ahead. Ole H. Slorer - Morgan Stanley & Co. LLC: Thanks. You highlighted that you were running out of certain rig capacities within Nabors Drilling Services. Could you just specify a little bit more what exactly they are and where do you see the incremental growth opportunity coming within that segment of your business?

Okay. I think one of the primary ones is that obviously in our – new AccuSteer MWD tools, which I think we've made some industry presentations. There's been some customer comments about the unique features and benefits of the tools compared to the typical tools that are used today in the marketplace. And we're – the number of jobs we're running were running close to utilization, so we're trying to keep pace by building up some more systems there. That's one area. Second area is the CRT systems. We think there's room for us to grow there, and we need access to more CRT systems as well. So, those are two principle areas that would be, number wise, matter. On managed pressure drilling, we have been – we have a sourcing for the rotating heads, and clearly for the sourcing. And per prior announcements, I think you know that we're in discussions with Weatherford about working through a model. We've continued to work with them on an overall commercial technical framework, have an alliance between us. We've identified some commercial opportunities in the U.S. market. And we're starting to work on what we need to do for software integration of our rig control system into their NPV software systems. So, that's what's going on there. But those are the three areas I would say where the growth is, and capital assets are the other things are needed.

Ole, we thought we were going to be at about 24, 25 rigs with our MWD services. By midyear, we hit that mark in the month of February. So, we're ahead of schedule. And obviously, that has required us to ramp up our construction of MWD tools right now. So, that's.... Ole H. Slorer - Morgan Stanley & Co. LLC: Okay. So, this is obviously in part also what's hitting you on the costs side. Because you mentioned a number of reactivation costs and other sort of non-recurring costs that has been accelerated. And I'm trying to sort of figure out how much of your earnings before tax of $163 million loss do you think was accounted for by costs that are not likely to recur once your business stabilizes?

I think we'll – you'll get the answer to that question when you see second quarter. But the wellbore placement was one of those areas. You've correctly identified, was one of those areas where there was a lot of extra costs, get things geared up to meet the – just like in the rig scenario, to get the systems out into the marketplace, et cetera. And all that stuff was expensed in the first quarter and absorbed in our numbers.

About $25 million, Ole. Ole H. Slorer - Morgan Stanley & Co. LLC: Okay. So, $25 million which means that your average pro forma revenue per rig, given 200 rigs, must increase about, say, $5,000 a day in order to bring you back to a breakeven. Is that realistic, you think, based on what you see in the business now with new products like NDS rolling out, being absorbed and some of the international rig pricing? How long time – what's the timeline do you think to get there to earnings before tax breakeven?

Ole, I think, volume will take us part of the way there in the U.S. And the pricing could go up by $5,000. Yes, it could. But the problem is we do have a fleet, though that the increase in the fleet's dayrates is not something that becomes automatic. I think you're waiting for – to go back to breakeven is probably unlikely this year. Ole H. Slorer - Morgan Stanley & Co. LLC: Yeah. Although I realize it's not – that spot pricing – or pricing is a gradual filtering through a contracted fleet but...

On NDS, we are seeing very faster acceleration in pricing and that's – we're not... Ole H. Slorer - Morgan Stanley & Co. LLC: Yeah, I mean (57:38) substantial premium to a standard land rig. So, the mix shift that – I'm just trying to get a feel for – there's a mix shift coming there, is a pricing – there's a volume, and they also have some nonrecurring costs. So, I'm just trying to (57:53) put together a picture here.

Yeah. Ole, it also depends on if we're successful getting even a small piece of an NDS (58:01) international markets with the service margins and the stuff I'm talking about are substantially higher. In fact, they're very material compared to, I would say, big markets. So, they would make up a very large effect, actually, depending on our success. Ole H. Slorer - Morgan Stanley & Co. LLC: So, what's the probability here of, say, being able to create an equivalent to maybe one STEM and the shape of one international land drilling?

One STEM with two...

(58:33). Ole H. Slorer - Morgan Stanley & Co. LLC: One STEM is the Schlumberger (58:37) joint venture around the frac equipment, and I don't think there's any secret that the land rig division is up for sale.

Yeah. Ole H. Slorer - Morgan Stanley & Co. LLC: So I was just throwing it out have also probability of doing something with another company. Anyways probably better for us for a different time. But thanks a lot. I'll hand it back.

Thank you.

Thank you, Ole.

Ladies and gentlemen, thank you for participating in our call today. If we didn't get to your questions or you have any questions, just feel free to call us or e-mail us, as always. And Andrew, could we close out the call, please?

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