Nabors Industries Ltd. (NBR) Q3 2026 Earnings Report, Transcript and Summary

Day, and welcome to Nabors Industries Limited Third Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, 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' Third Quarter 2026 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 to review our third quarter results. Strong operational performance in the quarter drove higher free cash flow and further delevering. We also advanced several strategic initiatives that position Nabors for future growth. I will start with our financial results. Adjusted EBITDA totaled $246 million, a very strong performance that exceeded our expectations. We reached several milestones during the quarter. In Saudi Arabia, SANAD successfully brought its 17th newbuild rig into service. In Argentina, we started our 14th owned rig in the country. The rig was an idle unit in the U.S. We also managed a rig owned by our client, making 15 total rigs operating. We renewed rig contracts in Algeria, Kazakhstan, and Oman. These renewals added 20 rig years to our international backlog. We redeemed $100 million of outstanding debt, advancing our commitment to reduce gross debt. Miguel will provide the details. We grew our geothermal footprint. For Quaise Energy, one of our rigs is currently drilling its Project Obsidian in Oregon. During the quarter, we increased our investment in Quaise. We are now its largest equity holder. We were also awarded a rig supporting Sage Geosystems, another U.S. geothermal developer. These U.S. rigs complement our ongoing work for geothermal client in Indonesia. Our Canrig TITAN automated rig floor wrench is rapidly gaining market acceptance. We delivered four units during the third quarter. Backlog for this next-gen tool exceeds 20 units. Finally, we received an award for a long-term project to refurbish and deploy our barge rig in Kazakhstan. Once the refurb is completed, this shallow draft unit will stand ready for relief well drilling if needed. It can also work on offshore drilling campaigns. Turning next to our international markets, I will outline where we stand and where we see growth. Our international footprint focuses on key markets across the Middle East and Latin America. Saudi Arabia remains our largest market through SANAD, our joint venture with Saudi Aramco. Regional hostilities have impacted Saudi drilling activity. We believe as many as 15 land rigs across the industry have received notices to suspend operations. These include five SANAD rigs. The suspensions should be fully implemented this quarter. The scheduled startup of another SANAD newbuild rig will offset a portion of these reductions. SANAD plans to deploy this 18th newbuild rig during the fourth quarter. At the same time, a number of competitor rigs should also start work under a previous LSTK award. Together, these changes would bring the land rig count in Saudi Arabia to approximately 191 at year-end. That implies a net increase of one rig in this market in the fourth quarter. SANAD ended the third quarter with 56 rigs working in the Kingdom. Three rigs have since suspended operations, bringing the current count to 53. Two more suspensions are scheduled this quarter. Including the planned 18th newbuild, we expect SANAD to end the year with 52 rigs. That would represent a market leading 27% share. Approximately two-thirds of Saudi land rigs target natural gas. SANAD exposure is concentrated with more than 80% allocated to gas. With 17 newbuilds already deployed, SANAD has 33 left under its 50 rig newbuild program. Discussions are still in progress for the fifth tranche of rigs, which will take the total builds to 25. We expect those to be finalized in the fourth quarter. Across the rest of the region, our rigs continue to deliver strong performance. In Kuwait, we operate three deep gas exploration rigs under long-term contracts. Gas development offers room to expand. We are currently evaluating a tender for additional 3,000 horsepower rigs. In Oman, our four rigs continue to deliver sound results. A large ongoing tender could create substantial additional demand. NDS adds another source of earnings to our international business. It is the largest casing running contractor in Saudi Arabia and the UAE. In the Emirates, NDS's EBITDA increased by more than a third sequentially. That gain reflects deeper adoption of NDS in this important market. Next, I'll turn to Latin America. Momentum across the region remains strong. In Argentina, we currently operate 14 rigs plus one under an O&M contract. One of our 14 started in the third quarter. We secured a multi-year contract by successfully redeploying an idle U.S. rig, enhancing asset utilization. Our client base is diversified across five operators. With a 33% market share, Nabors is the largest drilling contractor in the country. We are evaluating 10 new opportunities in this promising market. Nearly all of our working rigs in Argentina were formerly idle units in the Lower 48. Redeploying assets across geographies is central to our global strategy. It converts idle capacity into earnings and attractive returns without new build capital. In Argentina, NDS expands our opportunity beyond drilling. Nearly all of the rig prospects we are tracking include MPD. Our integrated MPD technology has gained broad adoption in the Vaca Muerta. NDS was recently awarded a multi-well program for its FracView and DrillView LWD solutions. This award extends our technology penetration with an established customer. Argentina continues to demonstrate exceptional potential as one of our key growth markets. Our rigs and technology position us to support further development of this world-class resource. I'll finish my comments on the international markets with another developing opportunity, Venezuela. We were awarded a multi-year drilling contract there in the third quarter. We are bringing an idle U.S. rig back online to meet the client's schedule. The broader outlook in Venezuela is improving. Nine rigs are currently working in the country. That compares with more than 85 in 2013. We are tracking more than 20 additional rig opportunities, reflecting continued momentum in our growth initiatives. That excludes potential increases by vertically integrated operators with their own rigs. We are also evaluating how to service those clients as well. We have five idle rigs in Venezuela ready to respond to activity increases. We are encouraged by the quality of customers considering new long-term drilling programs. With the right commercial arrangements, Venezuela could quickly become a meaningful contributor to our international business. Altogether, we have identified more than 80 incremental drilling opportunities across 11 countries in our international footprint, reflecting significant growth potential. Oman, Venezuela, Kuwait, Algeria, and Argentina account for the largest number of active tenders. Anticipated tenders would add further demand. The expanding range of prospects, including Venezuela's emerging recovery, is bolstering global rig utilization and driving positive momentum in pricing. We will remain selective and disciplined. Every award must meet our return thresholds and build long-term shareholder value. Across these markets, the priorities are clear. Arabian Gulf operations continue to generate strong performance. They draw on our talented staff, well-developed infrastructure, and deep customer relations. Saudi activity reductions will lower SANAD's near-term rig count. Scheduled new build deliveries support its market leadership position. For the medium and long-term, our view of this market remains constructive. Argentina's expansion creates demand for both our rigs and our technology. Venezuela's restart is taking shape. The growing pipeline points to a larger opportunity ahead. Now let's turn to the U.S. Lower 48. The Baker Hughes Lower 48 land rig count rose by 27 rigs or 5% during the third quarter. Last week, it remained at 577, surpassing the previous high of 568 in February 2025. This count is up 11% year-to-date. The Baker quarterly average increased by 24 rigs or 6% in the third quarter. According to Enverus, public operator activity was up slightly. Private operator activity showed a sequential increase of 8%. For the market as a whole, the public-private split stands at approximately 52 to 48. To summarize the quarter in the Lower 48, growth was concentrated in Texas markets. Smaller operators account for most of the increase. Our quarterly survey of large Lower 48 operators points to steady demand through year-end. These operators account for approximately 42% of the working rig count. Net, they added six rigs in the third quarter. Two operators drove most of the increase, partially offset by reductions at one. Most expect to hold activity steady in the fourth quarter. Those adjusting their programs plan a net addition of three rigs. A few operators have already indicated plans to add rigs in 2027. We will provide updates as those plans firm up. These early indications point to continued market strength. Turning to Nabors, we expanded our rig count by three units in the third quarter. Our Lower 48 rig count is up 12 rigs or 19% year-to-date. This is nearly double the increase in the Baker count. We added four rigs with larger operators during the third quarter. These clients tend to run longer drilling programs and adopt advanced technology earlier. Nearly 75% of our Lower 48 working rigs served publicly traded operators at quarter-end. That customer mix differentiates Nabors. Higher fleet utilization is also improving economics. Our Lower 48 daily margin increased during the quarter, surpassing $14,000. Turning to technology and innovation. Advanced technology is a cornerstone of our strategy. We develop it to enhance drilling results, drive higher client returns, and contribute to the growth of Nabors' earnings. NDS EBITDA grew 10% in the third quarter. Revenue on Nabors' Lower 48 rigs rose 10%, outpacing our rig count growth. Every product line contributed, led by MPD and RigCLOUD. Internationally, NDS delivered double-digit EBITDA growth in several key markets. Adoption of our solutions continues to broaden. That wraps up my prepared remarks. Now, let me turn to Miguel to discuss our financial results in detail.

Thank you, Tony, and good morning, everyone. We delivered another strong quarter exceeding our guidance on every key financial metric with EBITDA of $246 million and another 100 basis points on margin expansion. Sequential revenue growth of 7%, adjusted free cash flow that was $115 million better than our outlook, and delivery on our commitment to reduce gross debt by at least $100 million. Our third quarter results showed a continued broad-based operating improvement with every segment meeting or exceeding guidance. International drilling and NDS led the outperformance. International delivered record daily margins while NDS was supported by greater activity on Nabors' Lower 48 rigs and in international markets. In Lower 48 drilling, we added three rigs during the quarter and exceeded our average daily gross margin guidance. Continued pricing improvement and longer contract coverage in Lower 48 further strengthened earnings visibility in a tightening market. Higher activity and a stronger execution company-wide continue to translate into earnings power even as Middle East disruptions remain a near-term headwind. Our financial priorities remain clear. Convert earnings into free cash flow, continue our growth trajectory by investing selectively in projects with attractive returns, and reduce gross debt. We continue to execute and deliver on each. I will now review our third quarter performance and fourth quarter outlook, then discuss capital allocation and adjusted free cash flow. Total revenue grew 7% sequentially, lifting EBITDA by $24 million or 11% to $246 million, well above the top of our implied guidance. We converted 42% of revenue growth into EBITDA and margin expanded by approximately 100 basis points to 28.2% with sequential growth in all four segments. Turning to international drilling, EBITDA grew by $15 million or 12%, significantly higher than our implied guidance. Stronger operating performance in key Latin America and Middle East markets and contribution from higher margin deployments raised average daily gross margin by more than $1,500 to a record above $19,000. Average rig count increased from 93-95, reflecting SANAD's 17th newbuild, the redeployment of an idle U.S. rig to Argentina, a geothermal rig deployment in Indonesia, and the full quarter impact from the second quarter deployments. Contract roll-offs in Algeria and India during the second quarter partly offset these additions. These factors drove a 58% fall through and expanded the segment's EBITDA margin by 160 basis points to 32%. We exited the quarter with 96 rigs operating. Moving on to U.S. drilling. EBITDA increased $5 million or 6% sequentially, exceeding our implied guidance. Lower 48 led the outperformance with Alaska and offshore also surpassing expectation. In the Lower 48, average daily revenue rose more than $1,200 to approximately $34,800 for two main reasons. First, limited availability of high-spec rigs supported stronger pricing with high-quality customers in select markets. Second, day-rate adjustments recovered increases in field wages implemented during the quarter. These recoveries raised daily revenue but did not increase gross margin. We are pleased with the progress of our leading-edge daily revenue now in the mid-$30,000s, well ahead of our prior expectations. Alongside stronger pricing, we have extended contract term coverage. At quarter-end, nearly half of our Lower 48 rigs had at least six months remaining under contract. We expect to be at approximately 55% by year-end. Average daily margin increased by $232, surpassing $14,000, more than $200 above guidance. Average rig count grew from 68-73, and we exited the quarter with 74 rigs operating, both in line with our guidance. Currently, our Lower 48 count stands at 74 rigs. In Drilling Solutions, EBITDA reached $44 million, up 10% sequentially and 5% above guidance. The growth was driven by greater adoption in the Lower 48 of our performance software and downhole services on Nabors' rigs, with full utilization of our managed pressure drilling fleet and international strong continued growth in casing running, strong managed pressure drilling utilization, and equipment sales. NDS converted 72% of incremental revenue into EBITDA, expanding its margin by 167 basis points to 38%. NDS continued to demonstrate its capital-light model by converting approximately 88% of EBITDA into cash after CapEx. Now on to Rig Technologies. EBITDA of $5 million was up $1.8 million sequentially. The improvement came from stronger parts sales, capital equipment deliveries, including four of our latest generation Titan wrenches and casing drive systems. Turning to our fourth quarter, in international drilling, we expect rig count to average between 92 and 93 and to exit at 92. Following intensified hostilities in the Middle East, SANAD received suspension notices for five rigs in Saudi Arabia. SANAD's 18th newbuild remains on schedule to commence operations during the fourth quarter. The deployment of the 19th newbuild previously planned for the fourth quarter is now expected in the first quarter of 2027 due to conflict-related equipment delivery delays. The suspensions and the delayed newbuild are expected to reduce fourth-quarter adjusted free cash flow by $5 million-$6 million, net of reductions in operating expenses and capital spending. Despite these headwinds, we expect average daily gross margin to reach another record at approximately $19,500, underpinned by the full quarter contribution from the third quarter deployments in Saudi Arabia, Argentina, and Indonesia, high margin additions, cost reduction actions in Saudi Arabia, and continued strong execution despite persistent conflict-related cost frictions. Turning to U.S. drilling, we anticipate an average Lower 48 rig count of approximately 75, with 76 to 77 rigs operating at year-end. The exit rate represents approximately 95% utilization of the fleet that we can reactivate with maintenance level CapEx. Daily adjusted gross margin is expected to rise to between $14,500 and $14,700 from further pricing progress with a steady operating cost. Our Lower 48 outlook reflects continued strong demand for high-spec rigs, improving pricing, and longer contract coverage. We see selective pricing opportunities with high-quality customers pursuing sustained drilling programs. As readily deployable super-spec capacity becomes more constrained, additional reactivations will involve more investment. We will commit capital selectively, requiring attractive returns, adequate contract duration, and appropriate commercial protections. Turning to Alaska and U.S. offshore combined, we expect EBITDA of approximately $12 million. In Drilling Solutions, continued technology adoption and higher activity are expected to drive EBITDA growth of 5% to approximately $46 million. Rig Technologies EBITDA is expected to improve by $3 million to approximately $8 million. I will now discuss capital allocation and adjusted free cash flow. Third quarter capital expenditures totaled $141 million, down $17 million sequentially, and substantially better than guidance, led by the timing of SANAD newbuild milestone payments, followed by disciplined spending outside the Kingdom program. SANAD newbuild spending was $37 million in the quarter. For the fourth quarter, we expect capital expenditures of $250 million-$260 million, including $140 million-$150 million for SANAD newbuild, with approximately $90 million relating to the fifth tranche of newbuilds. Our full-year outlook now stands at $710 million-$720 million in consolidated capital spending, including $295 million-$305 million for the SANAD newbuild program. The updated construction schedule moves certain newbuild milestones into 2027, supporting stronger free cash flow this year. Outside of SANAD, increases in capital spending from the guidance provided at the beginning of the year are supported by incremental growth. The increases are expected to be cash neutral as certain key redeployments and sustaining projects come from customer support. Beyond SANAD, we continue to pursue attractive growth opportunities in international by redeploying idle or underutilized rig capacity. Our recently signed Venezuela contract illustrates this approach with a multi-year commitment with attractive economics and contract terms that meet our requirements. We are encouraged by the number of accretive opportunities in key markets that we expect to crystallize in the coming months. Turning to adjusted free cash flow, we generated $75 million of consolidated adjusted free cash flow in the third quarter, materially exceeding our guidance. SANAD generated positive free cash flow of $6 million, while the business outside the joint venture generated $69 million. The outperformance reflected lower capital spending and improved consolidated working capital, despite approximately $50 million in delayed collections in the Middle East. The collections delays were resolved at the start of the quarter. For the next quarter, we expect consolidated adjusted free cash flow of $60 million-$70 million, including approximately $20 million of cash consumption by SANAD. We now expect full-year EBITDA of approximately $930 million, the top of our prior guidance range, even after absorbing the Saudi rig suspensions. This implies second half EBITDA approximately 18% above the first half, and an annualized run rate of $1 billion heading into 2027. We are raising our full-year adjusted free cash flow outlook to the $100 million-$110 million range, including approximately $20 million of cash consumption by SANAD. The $80 million increase from the guidance we provided last quarter mainly reflects the shift of $30 million in newbuild milestone payments into 2027, controlled capital spending, and better working capital. in August, we fulfilled our commitment to reduce gross debt by at least $100 million this year. With cash on hand, we redeemed a portion of our 9.125% notes due in 2030, our highest coupon debt. This action lowers annual interest expense by more than $9 million and advances our objective of simplifying the capital structure. We expect cash interest expense in 2027 to be at least $50 million below 2025, with approximately $30 million of the reduction already realized in 2026. This directly enhances our free cash flow. We reduced net leverage to 1.7x this quarter, and our target remains approximately one times. We expect to achieve this by continuing to grow earnings, further improving cash conversion, and reducing gross debt, while maintaining discipline on every incremental commitment. With that, I will turn the call back to Tony.

Thank you, Miguel. I'll close with three points. First, third quarter EBITDA exceeded our expectations. We converted commercial wins and strong field results into higher earnings. Second, international drilling delivered record daily margins. Notwithstanding the headwind in Saudi Arabia, we expect the international margin to improve further. Broad-based demand across our international markets supports the longer-term growth outlook. Third, our Lower 48 business continues to gain ground. Higher specification rigs, integrated technology, and a higher quality customer mix are driving that progress. Together, our businesses are generating increasing free cash flow. We are using it to reduce debt and further strengthen our capital structure. We expect this combination of earnings growth and deleveraging to continue to build shareholder value. We see even greater opportunity ahead. Thank you for joining us. We will now take your questions.

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Joe Laetsch with Morgan Stanley. Please go ahead.

Hey, good morning, Tony and Miguel, and thanks for taking our questions.

Good morning, Joe.

I wanted to start on Saudi, where you noted some of the recent suspensions, including the five at SANAD. You mentioned in the prepared remarks that this would be partially offset by the 18th newbuild and some industry rig adds in the fourth quarter. Could you just talk a bit more about what has changed from an activity standpoint and help us think through the outlook in Saudi as we progress into 2027?

Sure. Let's put it in some context here. SANAD today has 53 rigs working, and as we said, there was a notice industry-wide of a suspension of 15. Seven of those took place in the third quarter, we understand. Eight of them still take place this quarter. We got five. Three have been realized already, and there's two more of the five to occur in this quarter. Obviously, we also have a newbuild going in place. The net count for us goes down by one from where we are today, down to 52. We'll look to have 52 rigs. I can't speak to the whole 15, but I can speak to our five in terms of some thinking what's going on. As you know, there's the Jafurah unconventional gas project, and it turns out the gas drilling in that project is substantially ahead of the completion and fracking program. So the drilling part of it is ahead, and that I think informs the decisions as to why this has occurred right now. With respect to the other 10 rigs, I can't speak to that, but that's part of the thinking here. So that gives you some color. Let me put the whole thing in some overall context in terms of the numbers here. At the peak in second quarter of 2024, Saudi rig count was 220. The low in the third quarter of 2025 is 160, and this third quarter exit is 190, and the fourth quarter exit, notwithstanding what I said about the suspensions, is 191. So I think we still have a very healthy position here, notwithstanding the bumps. Obviously, this whole thing is colored by the dynamic that has been exacerbated by hostilities and other things that are going on. So it's made more complicated, but we still feel good about where we stand right now. Then in terms of the newbuild, as we said, the 19th is rolling into the early 2027 to be followed by the 20th rig. Hold on a second. We have some breaking news here. The fifth tranche has just been signed and released, guys, so that should resolve some questions for you and give you some additional color on the market.

Perfect. That's great. That's helpful. Congrats on the fifth tranche. Maybe sticking with the international side. Daily margins increased by more than $1,500 in the third quarter, like you mentioned, and there's further improvement expected in the fourth quarter in the guidance. Could you just talk a bit more about what's driving that strength and how much is coming from higher-margin rig additions versus operating efficiencies? Maybe how sustainable are those margins into next year as well? Thank you.

Yes. I think what's going on here is basically it's been a while since you've seen consistent demand across geographies internationally as well as domestically, and that's what's happening here. With utilization above 90% effectively in the U.S. and the demand for some of these really robust projects like countries like Argentina and now more importantly Venezuela as well, and continued work in the Middle East, you're drawing on a set of rigs that no longer are freely available. It's just the capacity starting to really dwindle here, and therefore, that's going to drive pricing up. I think that's the first point. The second point is obviously for Nabors, where we have a developed market position, I think the margins reflect in part the fact that we're more mature at operating these things. We are a little bit more efficient as well. More importantly, I think we're beginning to see the beginnings of our strategy for NDS that we've been pursuing here in the U.S. taking effect internationally. In Argentina, in particular, a large substantial amount of our cash flow is coming from the NDS services around the wellbore on the rigs there. That includes the MPD and TRS as well as our technology package. Obviously, as you heard in our remarks today, our TRS position is growing in the Middle East as well. That will add to the momentum of our position and our pricing, and we think that strategy of exporting that kind of package worldwide is core to our strategy going forward.

That's great. Thanks for taking our questions.

Thank you. The next question comes from Derek Podhaizer with Piper Sandler. Please go ahead.

Hey, good morning. I was hoping you could help us quantify the financial impact on the fourth quarter from the five startup rigs that were suspended specifically, and then maybe just help us understand the timing around these suspensions, three months, six months. Just some help on the financial impact and then timing around the suspensions would be great.

Sure. Derek, I think we mentioned in our remarks that the impact in Q4 of these five suspensions will be around $5 million-$6 million of cash flow, considering not only savings on CapEx, but also on cost. That is already embedded into our guidance. As far as timing of the suspensions, as Tony mentioned earlier in the previous question from Joe, this is driven by the drilling schedule relative to the completions, in Jafurah. We will expect that these phases will catch up at some point in time. We do expect that these suspensions may be short-term, but we cannot tell you exactly when these rigs will come back to work. Right?

Got it. Okay. No, that's helpful. I appreciate the color there. Maybe just switching over to the Lower 48. Tony, you mentioned 95% utilization on your rigs, just given where you are, and then what else it could be redeployed from a maintenance level. Obviously very tight there. Could you help us understand the next set of rigs that would require more significant investment? Then what would you need to see in terms of contract duration and pricing, just considering you're already in the leading edge of the mid-30,000 on the day rate side?

Yeah. I would say there's a handful of additional rigs that can be put back with not too much capital. Beyond that, the next tranche of 10-12 rigs, there would be a more sizable number. After that, then you're into a whole new category. That for us is where we stand right now. In terms of if there's references to new builds, I don't see it happening right now still. I mean

No, not new. No, sorry.

Yeah.

Sorry. Definitely not new builds. Definitely not new builds.

Yeah.

No, just more of I guess maybe let's just start with that 10-12.

Yeah

As far as what you need to see in terms of contract duration. Obviously, you are adding to your contract term, which is great. Your contract coverage, excuse me. So as far as term and pricing, just on that 10-12.

Sure. Derek, to complement Tony a bit, we are guiding to be at around 95% utilization by year-end on rigs that we can easily deploy with maintenance CapEx level, if you will. Beyond that, once you pass the 80 rigs, you are in front of, as Tony mentioned, probably 10-12 rigs that will be a lot more costly. You are talking about, and I think we have mentioned that before, anywhere between $4 million-$8 million per rig. This requires a complete new set of economics, not only on day rate, but also on terms. Being logical as a drilling contractor, you will be requiring at least three years term to make this work. That will basically reduce the number of potential customers. As part of our actions, we have increased our exposure, if you will, to public companies over the past several quarters, because these are the ones that have longer drilling programs and more stable drilling programs, if you will. I think that is fairly clear, what I am trying to say in terms of the economics we have to expect. Okay?

Yes. No, very helpful, very clear. Appreciate your comments, and I will turn it back.

Thank you.

Thank you. The next question comes from the line of Keith MacKey with RBC. Please go ahead.

Hey, thanks, and good morning.

Morning.

So looks like Q4 or the updated annual guidance implies around $260 million of EBITDA for Q4. Can you just talk to us about how good of a jumping-off point that is for 2027? I know it is still early to be talking about 2027, but how should we be thinking about the EBITDA progression through 2027? Maybe just give us some of the puts and takes to the extent that you can. And anything you can tell us about CapEx plans for 2027 as well.

I will take that, Keith, and then Tony will complement for sure. Look, I think we have been very clear that we are right now at a run rate of $1 billion for next year as the base as you get into 2027. So if you look at our second half, we will be growing by around 18% relative to the first half. And this is driven company-wide, from the NDS to U.S. drilling to international, et cetera. If you ask us, really, we fail to see a single country, whether it is U.S. or international, that will not be growing next year. So we remain very optimistic, but rather realistic on how 2027 should be shaping. We will now give you a trajectory, obviously by quarter is too early, and we will do that once we announce our full year guidance at the beginning of next year. As far as CapEx, and I think we have mentioned this in previous calls, we will expect CapEx to be higher next year as a company, not only driven by the Kingdom program and one of the rigs that move into 2027. We will also continue to invest prudently but decisively on our growth CapEx for the rest of the company. What I will tell you in addition, without giving you a firm number, is that we will expect the company generating a meaningful step up in cash flow next year. Tony, anything you want to add?

Miguel, I think you have summarized everything. Just to emphasize, across the board, as Miguel said, everything seems to be aligning well right now, and the industry utilization just supports this outlook. So we feel pretty good about it. I think talking about cash flow, one of the things I am particularly happy with is our progress in NDS today. If you actually look at our year-to-date numbers on NDS through the third quarter, our cash flow conversion rate in NDS alone is at 90%, which is an astounding number. So we are happy about that, and as I mentioned, that is part of our strategy for continuing to grow in sort of almost a capital-light basis on top of everything else. So it is that combination of the NDS together with the rigs in markets where you see tightening that gives us this kind of feel good about next year.

Appreciate all the color. Since you mentioned the next tranche of newbuilds has been signed, I am curious if you can give us any additional detail on the potential deployment or planned deployment schedule for that next tranche of rigs, and maybe just update us on sort of how the existing newbuilds should come into the field next year, and then as well as this new tranche.

Sure, Keith. I think the way to think about next year when it comes to the newbuilds is in the first quarter of 2027, we should expect to see the last two rigs of tranche number four being deployed. Probably rig number 19 sometime in January, and rig number 20 towards mid or the latter part of Q1. When it comes to the fifth tranche, basically, which, as you heard, has already been signed, we may expect these rigs probably to be deployed during the second half of 2027. That is the way to think about it.

Got it.

By the way.

Starting in the second half or all deployed in the second half?

During the second half. You may expect one or two being deployed in Q3 and then Q4. However, I just want to be clear that we will expect SANAD to be deploying around five rigs next year.

Total.

In total.

In total. Yeah. The fifth tranche, as Miguel said, is the back half of the second half. Whether some of that leaks over to 2028, I cannot say for sure right now, but we are pretty confident there are five newbuilds in 2027.

Correct.

Okay. Thanks very much.

Yep.

Thank you. The next question comes from Eddie Kim with Barclays. Please go ahead.

Good morning. Seems like you've been gaining some good momentum in geothermal. You mentioned one recent deployment in Indonesia, one drilling for Sage. Could you just remind us how many rigs in total are drilling for geothermal today? Looking ahead, how quickly do you think you could get to maybe a double-digit number of rigs in geothermal? Is that a 2027 event or more likely sometime in 2028 or 2029?

I think it's further out, obviously. Right now we only have two, I would say. There's discussions on some additional ones, but I think we're looking at 2028, 2029 for sure to get those kind of numbers. Basically, we're waiting for the developers to catch up to us. I think we're ready to go. We have packages. We have some equipment that's really special for geothermal as well in place that can help that kind of drilling as well. But I think right now the market is still not there in terms of the opportunity to deploy large scales numbers yet.

Understood. Thank you. Just shifting to the Lower 48, if you could help us just with maybe just early thoughts on the trajectory of just the overall rig count next year. Year-to-date, most of the rig adds have been from the smaller operators and the privates. Do you expect just based on customer conversations you're having that the larger public E&Ps will start adding rigs next year, or is that still to be determined at this stage?

Well, as we said in our prepared remarks, on our survey, which obviously leans more towards the higher numbers, we've seen green shoots of some interest in increasing for next year. Let me first comment by basin, maybe that's the first way to talk about it. So in West Texas, we see the strongest market there. We see the strongest market for both pricing and its tightness in terms of availability. In South Texas, I think there the competition is getting a little more keen because the demands for customer rigs is moving to a higher spec kind of rig as well, which again favors us in that kind of market. North Dakota, it's been an unexpectedly bright spot. We've added rigs as customer demand has exceeded our expectations. East Texas, I think there it's a little bit more of a wait and see. Some contractors are keeping idle, underutilized rigs in the market, expecting there to be a stronger natural gas market. As you know, that natural gas market, everyone's expecting it. It still hasn't materialized. If that changes, that would be a whole new leg for everybody of incremental growth. Interestingly, the costs are up in that market for OCTG, frac and well heads. But there and elsewhere, I think other things like bits and directional drilling is not as robust. Finally, in Northeast, we've actually exited the Northeast market because we don't see a big upside. So when you look at our client base, I think, as I said, the few operators that actually have indicated to us, they have shown that there's some plans to add to next year. I think it's also the case that the large operators have been very disciplined about everything. You saw the oil price move up. You didn't see them really reset their plans to capture anything quickly, and I think that discipline's going to continue. So, if you look at some other third-party surveys in the market, I think we've seen numbers out there of anywhere from about in the bracket of 20-40. I think Daniel Energy Partners, they have a survey that's broader than our survey. I think their number was 33 rigs, which again, I have no reason not to say that order of magnitude is not reasonable. What else can I say? I think the only last point is that the market discipline does seem to remain in place, and the only thing about, going back to your point about the small operators, I think small operators are getting squeezed a little bit. I think the churn in the market in general has shrunken. There's still churn, but the window of project to project has definitely decreased given the tight availability, and that actually hurts the smaller guys, I would say, a little bit more. So that's why, again, I think our positioning to the larger guys right now is a pretty good thing, and it also plays into our technology as well. Because that's where the drivers are for the technology as to longer laterals, et cetera, all that stuff, and more content on the rig for a more robust profile. So that kind of summarizes it. Any more questions?

Great. No, that was very comprehensive. Appreciate all that color. I'll turn it back.

Thank you. Your next question comes from Jason Kim with J.P. Morgan. Please go ahead.

Tony, Miguel. Thank you for taking my question.

Morning.

Morning. It's encouraging to hear about Venezuela and how it could become a meaningful contributor pretty quickly. With five idle rigs already in Venezuela, another to redeploy in the U.S. And the option to redeploy U.S. units, excuse me, like the first rig, you seem well-positioned. How quickly and capital efficiently can you put additional rigs to work in Venezuela? Just as a follow-up to that, how are you deciding between sending idle U.S. rigs further to Venezuela and keeping up with domestic demand in the Lower 48?

Jason, I think this is a great question. Look, number one, the rig that we just disclosed is starting early next year. As we mentioned, is an idle rig coming from the U.S. We did this simply to support the drilling schedules in Venezuela for our customer. Otherwise, we will have redeployed the five idle units that we already have in country. As a reminder, we never left Venezuela. We always retain a small but fairly robust footprint of employees in country, maintaining our rigs to the best extent possible. As we have already disclosed, we are evaluating a number of opportunities, with longstanding customers and other customers in Venezuela to start operations next year. I think we will be in a position to redeploy or restart rigs in country fairly quickly based on the customer's schedule. Some could be during the second half of next year, in the latter part of next year. But definitively the message to you, Jason Kim, and the team here is that we do see very strong opportunities coming up, and we do see Venezuela as an area where we could continue to grow as we did several years ago, where we basically were operating, in the early 2000s, more than 15 rigs in that country. So the potential is huge there, and we remain very close to our clients as always, and very attentive to how the country is progressing. I hope that answers.

Yes, it does. Thank you.

Sure.

Can you comment on how you might expect the economics of those rigs in Venezuela and how it may compare to the rest of the Latin America business?

I will never give you granular details at the rig level, but we will expect our operations in Venezuela to be accretive to the international gross margin that we report every quarter. That is how you have seen the very robust progression of our gross margin over the past several quarters in international. It is a combination of the rig portfolio.

Wonderful. Thank you so much, Miguel. I will turn it back.

Sure. Of course.

Thank you. Your next question comes from Jeff LeBlanc with TPH. Please go ahead.

Good morning, Tony and team. Thank you for taking my question.

Sure.

I wanted to see if you could share your latest thoughts on Argentina and the potential for Nabors if the RIGI proposals are approved as expected.

Well, obviously, it's a key growth market for us and we now operate 14 rigs there, plus an O&M contract, and we're almost at 33% market share. I think we serve five operators, and there's a number of current bid opportunities out there. I think there's about 10 of them right now that we're looking at. As I said before, one of the great success stories there is the use of technology to help them develop the Vaca Muerta. And we've gotten broad buy-in from our customers. I think that's in part our success down there is because of that. MPD, which no one didn't think of Nabors as an MPD provider. I think we're one of the leading MPD providers in the country now. Similarly on the TRS stuff with the rigs. That combination makes it all very attractive, and I think given the macro of the country right now, I think it's been a more investable country for everybody, and people have a higher degree of confidence in everything there. I think all the stars have kind of aligned. That's why you see great interest by everybody there. I think the only thing is maybe too many guys to the party will spoil it. That's the only problem I have. But other than that, it's a very attractive market for us.

Okay, thank you very much. I'll hand the call back to the operator.

Thank you. Ladies and gentlemen, we will take that as our last question for today. I'll now hand it back to William Conroy for closing remarks. Over to you.

Thanks very much. We'll wrap up the call here. If you have any follow-ups, please reach out to us. And with that, Steiger, we'll wrap up the call.

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