Good day, and welcome to the Nabors' Third Quarter 2018 Earnings Conference Call. 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 Mr. Denny Smith, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining Nabors' third quarter 2018 earnings conference call. Today, we will follow our customary format with Tony Petrello, our Chairman, President, and Chief Executive Officer; and William Restrepo, our Chief Financial Officer, providing their perspectives on the quarter's results, along with insights into our markets and how we expect Nabors to perform in these markets. In support of these remarks, a slide deck is available, both as a download within the webcast and in the Investor Relations section of nabors.com. Instructions for the replay of this call are posted on the website as well. With us today in addition to Tony, William and myself are Siggi Meissner, President of our Global Drilling Organization; John Sanchez, our Chief Operating Officer for Canrig; and other members of the senior management team. Since much of our commentary today will include our forward expectations, they may constitute forward-looking statements within the meaning of the Securities and Exchange 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 their presentations whether qualified by the word adjusted or otherwise, mean adjusted EBITDA, as that term is defined on our website and in our earnings release. 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 to begin.

Good morning, everyone. Welcome to the call. We appreciate your participation as we review our results for the third quarter of 2018 and our assessment of the market going forward. Our results for the third quarter improved significantly, primarily reflecting the outstanding performance of our U.S. Drilling segment. The seasonal rebound in Canada and progress in Drilling Solutions also contributed to our improvement. As anticipated, the jackup divestiture impacted our International results. Rig Technologies was flat sequentially. I am very encouraged by the consistent upward progression in our quarterly results. We continue to deliver strong EBITDA improvement despite our International and Rig Technology segments not yet contributing to our growth. EBITDA for the third quarter was $201 million, up 7% sequentially. This improvement maintains the trend it started in the second quarter of 2017. Although increased results in International should arrive early next year, we still expect our total company free cash flow to generate a positive trajectory in the fourth quarter and beyond. Continued improvement in U.S. Drilling, Rig Technologies and Nabors' joint solutions should more than offset any early upcycle softness in our International segment. The main driver for our industry remains the favorable oil price environment. At current prices, operators industry-wide indicate they have a strong incentive to increased drilling activity. We also see a constrained supply of the types of rigs which are most in demand globally. In the Lower 48, strong customer demand for the highest spec rigs continues to drive the upgrade cycle and a sustained shift away from legacy rigs. Internationally, we see increased demand in multiple markets including Latin America, the Middle East and the Far East. During the third quarter, we deployed three upgrades from our initial six rig upgrade plan for 2018. Since our last earnings call, we have been…

Good morning. The net loss from continuing operations attributable to Nabors of $105 million represented a loss per share of $0.31. Results from the quarter included a loss in the reduction of our 9.25 notes of $10 million, or $0.02 per share after tax. The third quarter results compared to a loss of $202 million, or $0.61 per share, in the second quarter. The second quarter results included a loss related to the sale of our jackup rigs of $63.7 million, or $0.20 per share after tax. Revenue from operations for the third quarter was $779 million, a 2% improvement compared to the second quarter. The higher revenue was driven mainly by a 6% increase in the Lower 48 market and the seasonal recovery in Canada, up 53% sequentially. Revenue in Rig Technologies declined due to lower intercompany shipment of rig components. U.S. Drilling revenue increased by 4% to $274 million reflecting higher day rates in the Lower 48. Average rig count for the U.S. Drilling segment at 112 was in line with the prior quarter as a fractional increase in the Lower 48 was upset by a similar decrease in Alaska. International revenue was essentially flat at $377 million. Rig count increased sequentially by three rigs, despite the absence of the jackups which were sold in June. We would point out though, that the divested assets generated significantly higher revenue per day than the new rigs added to our working rig count. In Canada, revenue increased by 53% to $27 million driven by the seasonal rebound in rig count. The 75% increase in average working rigs was somewhat upset by a $2,500 decrease in revenue per day, mainly the result of mix as their smaller rigs returned to work. Drilling Solutions revenue increased 2% in the quarter to $61…

Thank you, William. I will conclude my remarks this morning with the following: What's unique about Nabors is our portfolio of businesses. Today, the signs in all of them are leading to a positive outlook. In the U.S. Drilling business, our track record this year shows the strength of our position and a clear path to increase forward momentum. As demonstrated by recent contract awards, our Lower 48 super-spec fleet is second to none. Our customers' uptake of these rigs validates our strategy and execution. Our super-spec fleet and the entire team are delivering tremendous value to customers. The offshore business has put up solid results in 2018. There are signs of additional improvement generally. We are well-positioned in our unique niche to expand this business from here. Internationally, we have 11 rigs signed for deployment in 2019. There are many additional discussions ongoing. The excess rig capacity is shrinking. Consistent with comments from larger service companies, we see a path for pricing to turn up in 2019. In drilling services, customer reception of our services is positive. We have a robust pipeline of additional content to market. We continue to make strides towards our goal of long-term growth and improving returns on capital in this segment. The Rig Technology segment should benefit from increasing activity in the U.S. and International markets. The rising rig count drives aftermarket activity, increases the volume of inquiries for new equipment and ultimately drives higher fulfillment. In sum, we continue to improve each quarter without a full contribution from two of our largest segments, mainly International and Rig Technologies. We see steady improvement in free cash flow in the fourth quarter and beyond, as increasing worldwide activity drives these segments as well. That concludes my remarks this morning. Thank you for your time and attention. With that, we will take your questions.

We will now begin the question-and-answer session. The first question comes from Marshall Adkins with Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, guys. I'll tell you what; it's first time in probably a decade I remember all cylinders firing together here. It really is good to see everything moving up and to the right. I'm going to hone in on the International side. I don't know if Siggi's there, but I know there's a lot of noise this quarter, next quarter in terms of getting a few of these things going. But I'm more curious about the full-year outlook, not only for 2019, but going into 2020, since that is – tend to be a longer lead-time business. Siggi, how are your conversations with customers going, looking out for the full year? Talk a little bit about pricing, and then finally, you've got, I think – you got 100 rigs running International, you got another 50 that aren't. Is that going to cost a lot to upgrade those? What's the outlook for those other 50 rigs? So, I know there's a lot in there, but just a generic outlook on International.

To set the stage for Siggi, just so it's clear, we're at a 96-rig count today, and in hand we have contracts signed for 12 rigs; actually not 11; 12 rigs to deploy during the next quarters through September 30. That's what's in hand right now, Marshall and there are robust discussions. I'll let Siggi add some more color to it, talk about where the markets are.

So, Marshall, there is – there's obviously idle rigs in the areas and those rigs will go to work with relative low CapEx (00:31:55) other ones go first. But initially, I expect (00:31:58) pricing pressure for those rigs. And then you have markets like Argentina, for example, where you need high-spec rigs, and we see a strong interest in rigs that we (00:32:10), so even new builds that we move into those markets. So, I think there's a strong potential to see a lot more rigs going. J. Marshall Adkins - Raymond James & Associates, Inc.: Is that going be pretty high mob costs? Should we kind of think about it that way or is...?

I mean the way that we've been going, obviously, there's mob cost. And, yeah, mob cost and also CapEx but the way we are negotiating it, we get the CapEx recovered in those deals. J. Marshall Adkins - Raymond James & Associates, Inc.: Terrific. And last one for you, Tony. I've got you all generating meaningful free cash flow, particularly as you go into 2020. What are you going to do with it? Is it just debt pay-down or if the demand's there, do you accelerate your CapEx?

I think right now, Marshall (00:33:00) around the company thinking about debt pay- down. And not because I'm not interested in continuing to grow. I think as you can see, we're really excited about our asset base right now and improving our asset base, et cetera. But we have to be measured to what we're approaching. And so, I want to get the best of both worlds. I want to continue to pay down debt and yet be poised to take advantage of our install base and getting more assets to work. So that's a balance. But right now, the bias continues to be pay down debt. That's the mantra right now. Pay down debt. We do think the past couple days have shown that the extra leverage does hurt our trading. And when somebody gets pneumonia, sometimes we get a cold, which I think is what happened the past 48 hours. But I think if you look at the debt markets and look at how our debt's raised and look what we just did with our banks, with the job William did on the banks is fantastic. We basically were treated almost like an investment grade company. So, I think for all those reasons I want to preserve that. And right now, the debt – getting debt paid down. And what we learned through it is show to our customers the value proposition of our assets and get them to be a partner in deploying some of these things. One of the other interesting things happening internationally is there is a tender coming out for rigs that will be asking for state-of-the-art, unmanned automation rig; basically a manless rig floor concept. And those kind of things I think will play to our bellwether; is that it's for a major Middle East operator right now. But that's the kind of thing that we would want to participate in. But again, we want to see the operator participate with us in helping change the landscape. So, all that said, I think debt pay-down is the priority. J. Marshall Adkins - Raymond James & Associates, Inc.: Great. Thanks, guys.

Okay. The next question comes from James Wicklund with Credit Suisse. Please go ahead. James Wicklund - Credit Suisse Securities (USA) LLC: Good morning, guys. Internationally, we have seen KCA Deutag and Weatherford and we've seen rigs change hands. And scale obviously matters in your business. And I'm just wondering internationally how long before you have all of your potential upgraded rigs put back to work. Does scale matter with what's going on in Saudi? Does it make sense for you guys internationally to be a bigger company? And the question really is, is this consolidation on the international markets, or will you just be satisfied with organic growth over time?

Well, I think you've hit on a core point. I think it's a truism in international that scale does matter, and I think historically, whether it's us and other people that have parlayed in international operations where they do single string operations, even if you've been in the country for 20 years, you start the single string operation, nothing ever goes as good as your pro forma. That's one of the negatives about our business. You have a pro forma, your revenue is fixed, and then you have all these plans, and the things that happen are usually negative on your cost side. And when you only have one or two rigs in a country it's hard to get it right the first time. And therefore, the mishaps have a disproportionate effect. So, scale does matter. And that's why, Jim, we try to focus on markets that have the potential for scale. If you look at where we're spending most of our time these days, Colombia, Argentina, Saudi, Kuwait, Oman, parts of Russia, Kazakhstan – we think all those markets – places for potential scale. And that does make a difference. It makes a difference also on your overhead because every country needs in effect its own small drilling company. And that's why when you look at revenue overhead of companies in the international marketplace, including the big service companies, those numbers are higher. There's a reason for that. And so all that (00:36:59) yes, growing and consolidation would be one of the ways to do that. You could assume we've looked at every deal that's out there. What we also have is a view that the international marketplace is about to go through the same kind of change that the U.S. marketplace has gone through in terms of a flight to higher quality rigs. And so, when you evaluate a bunch of rigs out there, you have to be aware of two things. You've got to be aware of what the SCR components are of those rigs, and number two, you've got to look at how compliant they are with the various so-called schedule Gs of the NOCs, which have special... James Wicklund - Credit Suisse Securities (USA) LLC: Continue to move up, yeah.

Yeah. And even when rigs are operating today under contracts, many people are not in compliance. So, when we do a deal, there's like a $7 million – it could be a $7 million hit just getting those schedule G compliance stuff. So, the CapEx, there's a bit of a hidden CapEx on these deals. And I'm not saying it makes the deals impossible, but it's just all stuff to be taken into account, and everybody has to be realistic about it. But yes, if there were a deal that fit – fell into the things I've described, and it was accretive to Nabors' shareholders, we think it will be a win-win for us. And frankly, we think it'd be really good for the industry. But the industry does need a little bit more of that internationally. James Wicklund - Credit Suisse Securities (USA) LLC: I remember International operations we had to put contingency on the contingencies and we were still low.

Yeah. James Wicklund - Credit Suisse Securities (USA) LLC: My follow-up if I could on the domestic markets, you've got 43 rigs that you can upgrade. And you say that this is the best use of your capital. You've got about 112, low 100-and-teens rigs that'll be working in Q4. How many years – I mean, that's three or four years of incremental capacity that you can add to the market with the 43 rigs that you can upgrade? Are we not going to build any new rigs in this market even though you've got day rates above the mid-20s? Are we not going to build rigs for a while if we can economically highest return upgrade the ones that are possible?

I think you've hit the nail on the head. I think certainly from our existing fleet, we have an interesting position in that these 45 rigs, as we've indicated to you before, can be upgraded – about – up to $9 million. If the operator has some special thing that he wants on top of that, that would be added to his price. But that's a pretty good number compared to what people will quote you today, including NOV, for a new rig. So... James Wicklund - Credit Suisse Securities (USA) LLC: No kidding?

That, we do think it is the best use of capital. And, of course, there's some of our competitors in the big five also have capacity. So, it's hard to believe that people will reach out to new building. The other point I'd make is some competitors talk about upgrade costs of $15 million. Well, if I use $15 million as an upgrade cost, Jim, the – I also have legacy SCR rigs. At that point, for $15 million, some of those can actually become candidates. So, there's actually – I mean, and answer it a little bit because we're unique because we have the internal capability to do this stuff. And in terms of (00:40:05). James Wicklund - Credit Suisse Securities (USA) LLC: Yeah, you can do it in your cost, yeah.

Yeah. And so – but the other point is in terms of our ability to execute, if there's operator demand and they're willing to put their money where their mouth is, and given firm contracts that make them economic, we actually have the capacity to actually roll those out, I would say, in maybe 12 to 14 months – that many rigs. I mean, Canrig at one point was building 10 top drives, 14 top drives a month. So, it's not like we can't do it, okay, but we need customer – alignment with customers and customers have to be a little more forthcoming with their plans and be part of that process. And frankly, that's the kind of discussion we're trying to initiate with some customers now on large scale to do that. That would be good for everybody and obviously we have tremendous spillover for the Canrig part of our business, which hasn't yet benefited from seeing a lot of this building yet. James Wicklund - Credit Suisse Securities (USA) LLC: Okay. Gentlemen, very good. Thanks for the answer. Good questions – good answers. Thank you.

Thank you.

Okay. The next question comes from James West with Evercore ISI. Please go ahead.

Hey, good morning guys.

Good morning.

Good morning.

Tony and William, as you see this ramp, this continued ramp in the Lower 48 and then I know it's coming in even stronger than you expected, and this seems to be kind of a quarterly phenomenon, and now that you're having conversations on 2019, is there a sense of more urgency building with your customer base for upgraded rigs? Are they becoming concerned that that supply that's out there is dwindling somewhat and that they need to make sure that they can grab a Nabors rig, or maybe of your competitors', and get in line quicker than perhaps six months ago?

I think, thematically, the answer would be yes. There seems to be an accelerating bias in terms of the super-spec rig and holding onto a super-spec rig. And if you recall back in the last conference call when I mentioned that Permian and our view on Permian, and I said to you when we surveyed our customers, we really didn't see a – this big downside occurring. I mentioned it to – that even when there was only one or two of the customers that we worked for had any excess capacity issues and they said to us that they had that problem, they were actually going to transfer that rig to another area so they could retain it. So, I think that that was an indication of that kind of bias. But I'll let Edgar, who now runs our Lower 48, and let him talk a little bit because he's dealt with some customers recently, give you some more idea about the sense of urgency. Edgar?

Okay, great.

Yes, we have been talking to customers recently, and in the context of our utilization, it's almost 100% for Tier 1. They are engaging more and more in these type of conversations. And that is how we're getting the type of contract that we have been able to announce and sign recently. So yes, they want to secure the rigs. With the purpose of securing the rig, now they have the willingness to put some capital up front, and it's not capital up front, but the minimum – the term that they are offering needs to be sufficient so we can guarantee the payback on the investment. That is the strategy that we have been following and so far, we have been successful with the rigs that we have announced recently.

Okay, okay, great.

And I think as you look at the economics for this stuff, I mean, everybody talks about manufacturing drilling, but to get there you really need a standard process. And the notion before of just getting the lowest, cheapest rig available doesn't really lend you to that. And this speaks well in terms of the consolidation of the curve with the big five. And I think it's a good sign and healthy for those super companies, and – but it's also good for the customer because he really does need to standardize to get in a mindset of manufacturing drilling and having these different versions of rigs that all don't have the same capabilities. I think it's not very good. From our point of view, of course we're providing something beyond super-spec which is SmartRig, which we hope to tap another leg up in terms of capabilities, and that's the next thing we'll be focusing on with customers.

Right.

I would like to add also that these rigs, when they are upgraded, they are extremely competitive. They're going to be fast moving. They have all the characteristics of the SmartRig. And I actually believe they're going be a great success in the market. So, going back to the conversation about new builds, I don't see a significant benefit on a new (00:44:27) to this M750 in the market. So, my view is that the M750 will be preferred, and they will need to be disclosed before new deals are brought into the market. And that will show capital has been on our side on the side of our competitors because it will not make sense for operators to make that investment, make that type of commitment, unless the payback is less than what we're able to obtain with the M750s.

Okay. Okay, great. That's great color. And then just maybe for William on SANAD with Aramco, is that venture now that we've done the first couple of moves – financial moves here and put cash into the venture. As you build out that rig fleet, are you now – is it now self-sustaining at this point? (00:45:17) build cash.

Well, actually right now we have way too much cash in SANAD at this point. So, we're discussing now this mechanism for flushing the excess cash out, and the discussions are more towards that than to the fact that SANAD needs to be funded. Now, I think we've managed to given enough of a head-start in cash, to be able to start financing the new builds coming up. It's not clear yet when NOB (00:45:54) will be ready to start delivering those rigs, but again, given our projections, I think, or I believe that Nabors won't be required to fund SANAD in the coming years.

Okay, great to know. All right, thanks, guys.

Okay. The next question comes from Chase Mulvehill with Bank of America Merrill Lynch. Please go ahead.

Hey, good morning. I guess the first question, if I could kind of get the view on potential further asset sales to accelerate debt pay down, realizing there's no liquidity – no reason to bring cash in the door because you've got plenty of liquidity. But just kind of over the medium term, what's your view on further asset sales?

Yeah. We're constantly looking to the company for excess inventory, excess yards, excess antiquated equipment to monetize. And so, that's an ongoing process. But it's nothing very needle moving, but it's just helpful day-to-day just to get it all up and get everybody focused on the right thing. But yes, we continue to do that. There's tens of millions of that in the hopper, probably, and of course for a year.

Okay. And then as it relates to that, how do you think about refinancing the 2020 and 2021 notes maybe over the near term or maybe medium term?

William?

We – I'll answer that. I think – this is William. I think that – when I think that Nabors has done for the last four years or so is to basically add sufficient capacity in the system so that we don't have to rush into the market at the wrong time to do our refinancing. I think all of our refinancings up to now, I think have been a model of how to do it in terms of finding the right spots in the market. And I think that will not change going forward. I think we will look for opportunities over the next quarters to do some refinancing, but, again, we're not going to rush into the market at the wrong time.

Okay. All right. I'm going to squeeze one quick one in, real easy. Potential upgrades for Lower 48 for 2019, how many should we be plugging into the model?

So, right now, we have, as I said before, we have 110 rig count today, and in the pipeline that are signed, in fact, we got three signed this morning, three more signed. So, now we have a total of 12. 12 through the third – through September 30 rolling out, of next year. And that's...

Okay.

That's locked up right now. And, as we said, there are discussions ongoing for even more.

What's the lead time? Sorry, go ahead.

They start – there's a couple that start in the second – in the fourth quarter, and then about five or six in the first quarter next year, and then after that, the second quarter of next year.

And if you signed a contract today, how quickly could you put that out into the market?

Maximum five months.

Okay.

And if we have some notice, we'd actually even accelerate that because once the machine's up and running we actually can do it even easier, once we get some long lead items in the inventory.

Okay. Got it. Thanks, Tony. Thanks, William.

Thank you.

Phil, we're closing in on an hour long here, and let's just take one more question then we'll wind up the call, please.

Okay. The next question comes from Marc Bianchi with Cowen. Please go ahead. Marc Bianchi - Cowen & Co. LLC: Thank you. Maybe just real quick, the guidance for fourth quarter International rig count, I didn't quite catch that. Could you just repeat that, please?

The – what was it?

Do you want to cover that, Tony? I mean, I think – we expect, yeah, 94 rigs for the fourth quarter. Marc Bianchi - Cowen & Co. LLC: Okay. Okay. Thank you for that.

That includes a divestiture we are – we have sold, in fact, as a deal that's already closed. Our long-awaited sale of our workover rigs in Argentina, which, as you well know, given our operations and some of our constraints, was a very, very slim cash-flow-generating business. So, that business is gone. About six and a half average rigs in the third quarter, which will not be there in the fourth. But including that, we expect to have 94 rigs in the fourth quarter. Marc Bianchi - Cowen & Co. LLC: Okay.

It's actually – it's net four incremental rigs in the fourth quarter.

Because we're adding two rigs.

Because we're adding some rigs, and that net increase is actually of rigs that are actually contributing rigs as opposed to noncontributing rigs. So, the mix, in other words, the mix of the portfolio actually improves dramatically. Marc Bianchi - Cowen & Co. LLC: Okay. Siggi mentioned some pricing weakness. I think you probably meant mix being the reason there for pricing but if you could just expand on that a little bit more.

There's pricing pressure, Marc. Marc Bianchi - Cowen & Co. LLC: There is pricing pressure?

There is pricing pressure. Marc Bianchi - Cowen & Co. LLC: Okay.

So yeah, that means that the recovery, first of all, is not uniform in all markets, right, as Tony mentioned. So, some markets are more tight and more competitive than others. In other markets we see no pricing pressure whatsoever. So – but part of our additional rigs that we've added over the last, I would say, six, seven months or contracts we've been awarded have been at lower prices that we could get in the past. So, there's a mix issue, yes, but there's also some softness in certain markets that means we don't get the same kind of day rates we had back in 2014 in the current environment with the amount of excess rates that we still have in there we still have to get rid of before we start seeing soft pricing momentum. And Tony mentioned that we expect that to happen in 2019. Marc Bianchi - Cowen & Co. LLC: Do you guys care to say, and I know it's maybe a little bit unpredictable, but where and when the international margin should bottom?

So, I'll answer that. And we have some expectations which we are giving to our operational team. And I can say that I have a lot of faith in Siggi Meissner. He sometimes tests my faith, but in general he's, they've done a phenomenal job of taking what the market has given us this year and doing better than we should expect sometimes. But right now, we are working on the budget for next year. And I think it would be premature right now to give you that information, given the mix. And it all depends on where we decide to apply and spend our dollars next year. And that is going be a driver on what the margins will be next year. So, until we have that budget process where Siggi and his team come to us and say, this is this is what we'd like to do, this is how much we're going to cost, and it will be an interactive process, and then we'll take some decisions on what gets added and what gets cut. And at that point, we'll be more able to give you a number. But we do expect to see a better margin in 2019 versus 2018. And we expect to see a higher EBITDA as well. Marc Bianchi - Cowen & Co. LLC: Okay. And just if I could – one more. The Saudi rigs which are transitioning to a higher cash flow per day and that's hitting in first quarter, could you just help us with what the uplift there should be on a cash flow basis?

It's a lot of money. That's all I'll tell you. Marc Bianchi - Cowen & Co. LLC: Okay.

It's a lot of money, and it all comes in starting in full force in the first quarter. And that gives us a lot of the confidence while you're hearing that year-to-year international free cash flow is going be up, okay? So that's the way I would – so in other words, when you're trying to look at gauging the effects of margins, I'm just saying the bottom line with these rate increases – it's a lot of money and free cash flow's going be up year-to-year in International. Marc Bianchi - Cowen & Co. LLC: Okay, great. Thanks very much.

Okay, this concludes our question-and-answer session. I would like to turn the conference back over to Denny Smith for any closing remarks.

Thank you, ladies and gentlemen, for joining us today. And if you had a question we didn't get to, feel free to call us or email us, and as always, we'll be available. Thanks again.

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