Good day, and welcome to the Nabors Industries Limited Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] please note that this event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Corporate Development and Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining Nabors Fourth Quarter 2025 Earnings Conference Call. Today, we will follow our customary format with Tony Petrello, our Chairman, President and Chief Executive Officer; and Miguel Rodriguez, 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, Miguel and me, are 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 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 our filings with the Securities and Exchange Commission. As a result of these factors, our actual results may vary 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 net debt, adjusted operating income, adjusted EBITDA and adjusted free cash flow. All references to EBITDA made by either Tony or Miguel 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. Likewise, unless the context clearly indicates otherwise, references to cash flow mean adjusted free cash flow as that non-GAAP measure is defined 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. With that, I will turn the call over to Tony to begin.

Good morning. Thank you for joining us today as we review our fourth quarter results. We will also highlight a number of accomplishments we achieved throughout the year. I'll begin this morning with those. During 2025 and through the beginning of this year, we completed a sequence of significant transactions, beginning with the purchase of Parker Wellbore for Nabors shares and assumption of debt, followed by the sale of Quail Tools and finishing with debt redemptions and a significant debt refinancing. Compared to the end of 2024, we reduced net debt by $554 million. This improvement significantly derisks our capital structure. At the same time, we will reduce annualized cash interest expense by approximately $45 million. We also have a portfolio of businesses remaining from Parker that we project will contribute at least $70 million in adjusted EBITDA this year. Now let me turn to our financial results for the quarter. Adjusted EBITDA totaled $222 million. This performance was better than the expectations we set on our previous earnings conference call. These results were primarily due to: first, stronger overall performance in our U.S. Drilling segment, including our Lower 48 average rig count and daily margin and increased EBITDA from our legacy Drilling Solutions segment, excluding Quail in the third quarter. NDS's casing running and managed pressure drilling business led this improvement. Sequentially, our total EBITDA, excluding the contribution from Quail in the third quarter, once again improved. This result reinforces several of our strategic priorities, namely our focus on performance excellence in the Lower 48 rig market, expanding in the international drilling market, where we generate attractive returns. We also benefit from the stability of multiyear contracts and developing and deploying innovative technology, which advances the capabilities and efficiencies of the drilling process. Our commitment to these priorities led…

Thank you, Tony, and good morning, everyone. I will begin by reaffirming our unwavering commitment to continue to strengthen our balance sheet and enhancing our capital structure. Delevering remains our highest financial priority, and we will endeavor to take decisive actions to keep reducing gross debt. At the same time, our organization is well positioned to operate at peak performance and deliver durable growth and long-term value. Our financial targets are designed to be appropriately rigorous to drive the business forward. Today, I will start with an overview of our full year performance and a detailed discussion of our fourth quarter results. Next, I will outline our guidance for the first quarter and full year 2026. Then I will provide a brief update on the integration of Parker Wellbore. I will conclude with remarks on capital allocation, adjusted free cash flow and the recent actions we have taken to materially strengthen our capital structure. Full year 2025 revenue was $3.2 billion, reflecting growth of 8.7% year-over-year, driven primarily by the acquisition of Parker and a strong international expansion. Full year adjusted EBITDA was $913 million, $31 million higher than the prior year. This performance was driven by the same underlying factors. Now turning to the fourth quarter results. Fourth quarter consolidated revenue was $798 million, a decrease of $21 million or 2.5% sequentially. The divestiture of Quail Tools resulted in a reduction of $34 million compared to the third quarter. This impact was partly offset by continued growth in our International Drilling segment. Without the contribution of Quail in the third quarter, consolidated revenue grew $14 million or 1.7% sequentially. EBITDA was $222 million, representing an EBITDA margin of 27.8%, down 110 basis points sequentially. This result exceeded the expectations we laid out in October. In absolute dollars, EBITDA decreased…

Thank you, Miguel. I will finish this morning with a few points. First, the transformation of our capital structure shifts significant value to our equity investors. We have also lowered our annual interest payments. This will boost our free cash flow. Second, in the Lower 48, our efforts to deploy industry-leading capabilities are paying off. Our high-spec rig solutions are gaining traction, demonstrated by the recent increase in our own rig count. Third, in our international drilling business, we have seen a significant turn for the better in Mexico. Events in Venezuela could lead to increased oil activity there. Funding SANAD's newbuild program results in the consumption of cash at the JV until crossover. Notwithstanding the near-term free cash flow outlook, this investment opportunity remains one of the industry's most attractive avenues for growth. Each annual tranche of new builds at 5 per year should generate incremental annualized EBITDA of more than $60 million. At current valuations of drillers in the Middle East, that translates into more than $500 million of value creation each year. In short, our international franchise offers multiple growth prospects. We aim to capture our share of these in ways that generate significant value. That concludes my remarks. Thank you for your time this morning. We'll now take your questions.

[Operator Instructions] First question today comes from Derek Podhaizer with Piper Sandler.

I just wanted to start with your Lower 48 outlook. You've talked about the rig count increasing to that 64 to 65 range. That's up from 60 just did in the quarter. This bucks the trend a little bit from some of the other drillers that we've heard over the last couple of weeks. It sounded like in your opening comments, it's more public E&P driven. But maybe could you just expand on the drivers behind the increasing rig count, maybe the customer type, the basins, public versus private? Just a little bit more color on that would be great.

Sure. So yes, today, just to rephrase, we're running 66 rigs. And looking at last quarter, the rig count was stable, but there was a lot of churn. You had basins going up and down. You had a mix between gas and oil in the shifting, and that has resulted in Nabors shift as well. So if you look at us right now, we're now 80% public and our gas rig count is 20%, which is double from where we were before. The other thing that's interesting is looking at the type of drilling that's going on, which is the longer laterals. The trend is clearly in that direction. I'll give you some statistics here. If you look at West Texas, the change in West Texas of laterals of 3- or 4-mile laterals, they accounted for that bucket was 19% of our wells in 2025 versus 12% in 2024. The growth in laterals generally for us in terms of pushing more than 3-mile laterals was 25% in 2025. That's up from 15% to 16% in 2024. And if you look at number of 4-mile laterals, which is a really small tiny bit, that number actually quadrupled our percentage. Now why is that important? That's important because Nabors, I think, has a fleet of PACE-X rigs that are well suited to drilling these kind of wells. And you saw from the Ultra, we've actually improved on our base case on that as well. So all that, I think, has positioned us really well in the market. And we remain pretty bullish on the long-term picture for gas, and we think that all our strengths play to that as well. So that in summary. On top of that, obviously, we've basically just maintained discipline and trying to focus on performance day-to-day, and that accounts for some of the changes of some recent wins. But as you said from our outlook, we remain cautious about the market. And I'm pleasantly surprised by the commodity price, as I mentioned, and we think though we're in a great position right now going forward.

If I may add as well, if you look at the remainder of the year, we are looking at H2 with a lot of caution given what's going on in the market. But I mean, we are very confident about our customers and our team to keep the momentum. And as a reminder, the outlook that we have provided for the full year really translates in a couple of rigs going up versus 2025. And the range that we provided is quite short relative to our peers, if you will.

The next question comes from Keith MacKey with RBC.

Can you comment a little bit more on what you're seeing on the ground in Saudi Arabia? I know the SANAD newbuild program looks like it's moving along quite well. But certainly, in the Kingdom, there's going to be a number of rigs to be activated throughout the year. And Tony, as you mentioned, the labor market over there is fairly tight. So can you just comment on your confidence around time lines that both the reactivation rigs and the new build rigs will essentially go to work on schedule? And how do you generally manage that? And what are you seeing on the ground in the industry?

Sure. Well, let's put the whole thing in some context. Right now, the rig count in the Kingdom, I think land is about 168, offshore 60, and I think there's about 35 LSTK rigs working, which is about around 260-plus rigs in the kingdom. At the market peak, 80 land rigs were idled and 23 came into the market. So that's a net down of 57. And I think we've heard that there's 40 rigs out of 83 that were suspended that received notices to return to drilling. 2 of the 3 are obviously SANAD, and we're highly confident those 2 rigs are going on the schedule I just outlined, which is the second and third quarter. There's no question about that from our point of view. But for everybody else, that leaves dozens rigs that still have to go back to work. And I think the labor market is heating up over there. I think given our position in the Kingdom Mill and our vertical integration, we have no problem with those rigs, and we have no problem with the 5 newbuilds at all. So I think we're highly confident of our rig count going forward there. I think the large-scale resumption of Aramco putting back all these rigs to work, which about nearly half, I think they have -- are in the process of going back is an incredibly positive signal to the market, I think that's the macro thing I get out of this thing. It shows Aramco is usually ahead of the market in terms of where these things are going. And this, I think, means that in 2027, people are looking at 2027 being a good year and Aramco is trying to position itself to do that. That's my own read on it. So I don't know if that's enough color for you.

Just one comment, Keith. On the suspended rigs, we are expecting them to come back, one in March and one in June, one in the latter part of Q1 and the second one in the latter part of Q2.

Next question comes from Scott Gruber with Citigroup.

I wanted to ask a question on Mexico. It's good to hear that the platform rig will be going back to work, but we've seen some headlines suggesting a potential pretty healthy step-up in upstream spending in Mexico this year. Are you having any negotiations to put additional rigs to work in Mexico beyond the fourth platform rig?

Right now, the four platforms there, and there's always been other discussions about supporting other rigs there. We actually have some other services that we're supporting other rigs, including PEMEX own rigs there in addition. But I think right now, we're really focused on making these 3 really profitable and the fourth one moving forward. But yes, I think the market is a little more positive. And obviously, the payment mechanism turning around is a big deal. So that too.

Got it. And then I think there was some $50 million, $60 million of CapEx that may have slid from '25 to '26 within the SANAD newbuild program. Is that accurate? And how should we think about the kind of run rate for a 5-rig annual program in terms of CapEx? Is that still about $300 million? Or is it a bit higher now?

Yes. I mean -- so Scott, really, the plan for the year originally was to be around $360 million. We are at the $274 million mark in 2025, which means, as you rightly mentioned, we are probably around the $85 million that is moving from one year to another from what was planned originally. I think the right way to think about the upcoming years is probably '26 around the $360 million, $380 million we guided with '27 going down from these levels because we will be catching up in '26 and maybe '27 around the $320 million, $330 million. That's probably the right way to think about it, which factors correctly the 5 rigs built.

The only thing I'd add to that, Scott, is I saw your write up yesterday and -- or last night. And I think when you analyze the situation, you can't look at the consolidated free cash flow number. I think that's a misnomer. When you have to look at SANAD and its needs and its needs are satisfied by SANAD. Nabors away from SANAD, as Miguel referred to, will have $80 million to $90 million of free cash flow. That cash flow is available for net debt reduction. And so this notion that there's a concern about ability to meet net debt reduction is not fully the whole picture. The other point I'd make is if you look at our portfolio as a whole, I mean, if you look at international as a whole, when you count the Saudi rigs of 5 plus the 2 [indiscernible] is 7. And then there's another 3 rigs, the Mexico rig and 2 Argentina, that's 10 rigs, okay? If you look at 2024, Nabors added 9 net rigs. This year, we're adding 10, there's nobody in the industry that has that kind of visibility that and all those are locked in. And beyond that, there's these 5 rig programs additionally. And so when you look at the value of Nabors' portfolio, I think your comments about valuation and how you look at it are just not really on point because no one has that kind of built-in growth and that kind of strong client base nor the #1 oil company partner in the world in the largest market in the world. And I don't think that analysis takes any of that in account in the analysis of -- particularly of the free cash flow. So I just thought I'd share that with you.

No, I appreciate the comments. I just think from a high level, people have been waited for that consolidated free cash inflection point. And it does seem to be approaching. I mean, I think with the momentum.

To be honest, we remain on pace with what we have been communicating when we expect SANAD to cross over. And as you can see from what we originally guided for '25 was a consumption of $150 million. We ended the year because of the CapEx moving from 1 year to another at 55, but the guidance of 2026 in terms of cash flow consumption is much lower than what was guided for '25, which tells you that the EBITDA progression and growth in SANAD continues to build. And then once you stabilize the CapEx milestones, as I mentioned, for '27, you will be very close to the turning point in terms of crossing over.

The other thing is you look at what others have done in the Kingdom in terms of investing there, their EBITDA payout going into these deals has been around 7 and their free cash flow payout are more closer to 10 years. And so our investments are orders of magnitude better than any of those terms of any of those deals that have been made elsewhere in the Kingdom for sure. So again, I think that's why I strongly believe that the value that you need to put on this is much higher than what has been recognized so far.

The next question comes from John Daniel with Daniel Energy Partners.

First one, hopefully, you can hear me okay. The second half caution, which is probably prudent, is that based off of known rig releases or just an expectation of stuff that might come from EPM&A, et cetera, in efficiencies?

It's more just the constant -- all the external noise, the EIA, even as of last week, is talking about oversupply and the market's reaction, even though I don't think the market is logical when we think the rand is going to not have a blow up or your [indiscernible] get resolved and all of a sudden, the whole market goes the other way. I don't think that's so found it because I think the oil markets in the physical side turning -- it's more like turning a dirt barge than it is heat boat, but the reactions are that way. And obviously, those kind of swings we're still subject to. So it's really that and anything really cracking here. As I said, we've been pleasantly surprised, and you can see from our progress so far, we're doing pretty well. But we're cautious and we have everybody really focused on the cost structure here to plan if the downside does occur. That's the way we're thinking about it.

Our team, John, is very strongly positioned to keep the momentum, and we are very confident about the team in Lower 48 and our customers. But we will be very happy to provide a subsequent update if we see really the market changing from our conservative guidance for the second half, right?

Fair enough. My second question and final one is, can you guys elaborate a little bit on the new can rig wrenches and what that could mean for Nabors and just a little bit more color on the cycle time improvement?

Sure. So basically, what this wrench is it's a 3-bite wrench as opposed to the standard 2-bite wrench, and it's loaded with feedback and automation. So as you know, we have our razor rig out there, and this is another -- will be another component in that where the wrench will be capable fully autonomous mode in its initial dressing on the first couple of wells in the past month or so. It has a stellar record of 1 bike grabs because of all this automation and sensors. So -- and for the larger pipe that people are using, the more -- for the complicated wells, this wrench is well suited to that as well. So we're highly, highly positive about it. We've actually had drilling contractors come and look at the wrench. The initial reaction is really high. So our first priority is get some of these out of labors rigs, and then we're hoping that actually canrig will actually have some -- a lot of third-party demand for this wrench as well. So we're really happy.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Conroy for any closing remarks.

Thanks very much, everyone, for participating. If you have any questions, please don't hesitate to follow up with the IR team. With that, Chloe, we'll wrap up here.

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