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Date

Feb. 11, 2026 at 12:00 a.m. ET

Call participants

  • Chairman, President, and Chief Executive Officer — Anthony Petrello
  • Chief Financial Officer — Miguel Rodriguez
  • Vice President, Corporate Development and Investor Relations — William Conroy

Takeaways

  • Net debt reduction -- Net debt fell by $554 million compared to the prior year-end, contributing to the lowest level since 2005 and materially "de-risk[ing] our capital structure."
  • Annualized cash interest expense -- Company expects a reduction of approximately $45 million from recent debt refinancing.
  • Full-year revenue -- $3.2 billion, representing 8.7% year-over-year growth, mainly driven by the Parker acquisition and strong international expansion.
  • Full-year adjusted EBITDA -- $913 million, up by $31 million year over year.
  • Q4 consolidated revenue -- $798 million, down $21 million or 2.6% sequentially, with a $34 million reduction due to the sale of Quail Tools and a $14 million sequential gain excluding Quail.
  • Q4 adjusted EBITDA -- $222 million, yielding a margin of 27.8%; decreased $15 million sequentially but increased 2.6% when excluding Quail Tools.
  • International drilling segment (Q4) -- Revenue grew to $424 million (+4.1% sequentially); EBITDA rose to $131 million (+2.9% sequentially); average rig count increased to 93.3 (up four rigs); daily rig margin was $17,130, down $301 sequentially and below guidance.
  • U.S. drilling segment (Q4) -- Revenue was $241 million (-3.7% sequentially); EBITDA $93 million (-1% sequentially), with a 30.7% EBITDA margin, reflecting improved daily margin in the Lower 48.
  • Lower 48 rig count -- Ended Q4 at 62 rigs, rising to 66 currently, with additions dispersed across the Permian (four rigs), Eagle Ford (three rigs), and Haynesville (two rigs).
  • PACE-X Ultra rig adoption -- First unit working for Coterra in South Texas since mid-September, with discussions underway for a second deployment and additional upgrades.
  • Nabors Drilling Solutions (Q4) -- Segment revenue $108 million; EBITDA $41 million; normalized EBITDA margin improvement to 38.3%; revenue on third-party rigs up 10% sequentially versus a 1% rise in third-party rig count.
  • Rig Technologies (Q4) -- Revenue $38 million (+6% sequentially); EBITDA $5 million (+$1 million), with improvements driven by year-end equipment sales.
  • Parker Wellbore integration -- Achieved $63 million of annualized run-rate synergies in Q4, ahead of the $60 million target, and expects at least $70 million adjusted EBITDA from retained Parker operations in 2026.
  • Q4 adjusted free cash flow -- $132 million, driving full-year adjusted free cash flow to $117 million, exceeding revised guidance of $80 million.
  • Capital expenditures -- Q4 CapEx of $158 million (including $78 million for Kingston newbuilds), below prior guidance; full-year CapEx totaled $695 million, including $274 million for SANAD newbuilds.
  • SANAD joint venture activity -- Deployed fourteenth newbuild in Q4; five more newbuilds expected in 2026 and one in early 2027; two suspended rigs scheduled to resume work in late Q1 and late Q2 with contract extensions; elected not to renew three low-margin workover rigs with no impact on full-year EBITDA guidance.
  • Guidance for 2026 -- Company expects normalized EBITDA growth of 6%-8% (excluding Quail), full-year International Drilling average rig count of 96-98 with a December exit at or above 101 rigs, and Lower 48 average rig count of 61-64 rigs.
  • Debt refinancing -- Issued $700 million of 7.58% senior priority notes due 2032, retired $546 million of 2027 notes and $379 million of 2028 notes, lifting weighted average maturity to 5.3 years from 3.7 years, with improved credit ratings and a net leverage ratio of 1.7x, the lowest since 2008.

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Risks

  • International Drilling daily rig margin fell by $301 sequentially, missing guidance due to "activity disruptions in Colombia," increased maintenance days in Saudi Arabia, and startup inefficiencies.
  • Fourth quarter consolidated revenue dropped 2.6% sequentially, with EBITDA margin down 110 basis points to 27.8%.
  • SANAD expected to consume $100 million-$120 million of adjusted free cash flow in 2026, contributing to negative consolidated adjusted free cash flow guidance for the first quarter ($80 million-$90 million consumption expected).
  • Ongoing global oil market uncertainty referenced by management, with Petrello stating, "we are cautious, and we have everybody really focused on the cost structure here to plan for if the downside does occur."

Summary

Nabors Industries (NBR +5.72%) reported full-year revenue growth of 8.7%, driven by international expansion and the Parker acquisition, and achieved adjusted free cash flow notably above revised expectations. The company executed a series of capital structure moves, including material net debt reduction and an extension of debt maturities, which also yielded credit upgrades. Segment performance in Q4 was marked by gains in International Drilling and Drilling Solutions, partially offset by softness in U.S. Drilling and deliberate non-renewals of low-margin workover rigs. Management provided guidance for continued rig count and EBITDA growth in 2026, supported by pipeline visibility in Saudi Arabia and Latin America, alongside ongoing investment in high-specification rig technology and automation. Nabors Industries emphasized a cautious posture for the second half of the year given commodity price volatility and lingering macro risks.

  • Adjusted free cash flow for 2025 outside the SANAD joint venture totaled $175 million, with high receivable collections in Mexico contributing to working capital gains.
  • The company maintained Lower 48 average daily rig margins above guidance and highlighted diversification across both oil and gas basins as a driver of near-term rig additions.
  • PACE-X Ultra and related high-end rig deployments are attracting strong operator interest for long-lateral drilling, evidenced by "If you look at the number of four-mile laterals, which is a really small share, that number actually quadrupled as a percentage." in 2025, supporting premiumization strategy.
  • Full-year CapEx for 2026 is projected at $737 million-$760 million, with $360 million-$380 million allocated to SANAD newbuilds, but a decrease in other international reactivation spending is anticipated.

Industry glossary

  • PACE-X Ultra: Nabors Industries Ltd.’s upgraded, high-specification rig featuring advanced automation and higher-capacity systems for extended-reach wells.
  • SANAD: Nabors Industries Ltd.’s joint venture with Saudi Aramco for onshore drilling in Saudi Arabia, encompassing a multi-year newbuild program and joint rig operations.
  • Kingston newbuilds: A series of new high-spec rigs constructed for the SANAD joint venture as part of its fleet expansion in Saudi Arabia.
  • Quail Tools: Former Nabors Industries Ltd. subsidiary divested as part of portfolio optimization and Parker Wellbore integration.
  • CANrig: Nabors Industries Ltd. subsidiary providing automated and advanced rig equipment, including the new three-bite wrench technology.

Full Conference Call Transcript

William Conroy: Thank you for joining Nabors Industries Ltd.'s Fourth Quarter 2025 Earnings Conference Call. Today, we will follow our customary format with Anthony 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 Industries Ltd. 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 Anthony, 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 Industries Ltd. 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 Anthony 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 measure. With that, I will turn the call over to Anthony to begin.

Anthony Petrello: Good morning, and 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 will 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 Industries Ltd. 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 de-risks 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 Lower 48 average rig count and daily margin, and increased EBITDA from our legacy Drilling Solutions segment excluding Quail. In the third quarter, Nabors Drilling Solutions’ 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 and 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 to our recent accomplishments. We are confident they will lead us to future success as well. Next, I will address the broader market environment and Nabors Industries Ltd.’s position in those markets. Let me start with the commodities. Oil prices were in a downward trend in 2025.

This lasted through the U.S. announcement to import Venezuelan crude in early January. Subsequently, there was a production interruption in Kazakhstan that helped trigger an increase. These were followed by uncertainty around tariffs related to Greenland and protests in Iran. We are evaluating the lasting effect of these items including the potential reaction by our client base. These events occurred against a backdrop of global oil supply exceeding demand. The EIA’s figures showed a surplus each month of 2025.

Looking ahead, we see several issues that could impact oil prices including continuing uncertainty around future tariff actions, oil production increases both inside and outside OPEC, the recent interruption at Tengiz in Kazakhstan, reported inventory builds in certain markets, higher demand concentrated in Asia, and ongoing conflicts involving Ukraine and Iran. Our global drilling markets each have their own drivers; with our current geographic reach, we are well positioned to benefit from improvements in those countries. Next, I will comment on Venezuela. We have operated in Venezuela since the 1940s. At our peak, we had 18 rigs working there for multiple customers. More recently, we worked into 2020 when our client wound down operations.

That was due in part to problems with payments and OFAC regulations. Today, we have five idle rigs and a small number of key local personnel in-country. With suitable commercial terms and security arrangements, we are prepared to return to work there. We are already in discussions with multiple operators. Across the Middle East and North Africa, several markets have aspirations to increase their production capacity. Our business portfolio aligns with these expansion plans. Turning to the U.S. market, operators in the Lower 48 appear focused on maintaining production. At the same time, they are positioned to react quickly should oil prices no longer support their investment return metrics.

Our approach in this market is to exercise cost discipline while we deploy advanced technologies. Our innovations augment operator investment returns with enhanced production and efficiencies. The outlook for natural gas remains positive over the next several years. In the U.S., LNG exports and domestic consumption should ramp up. Elsewhere, in the Middle East and Latin America, continued expansion of natural gas supports drilling activity. In the Lower 48, the gas-directed industry rig count increased by more than 20% in 2025. Nabors Industries Ltd.’s gas rig count increased by 50%. Currently, gas-directed activity comprises approximately 20% of our overall rig count in the Lower 48. We stand ready to respond to any increased demand across gas-producing basins.

Next, I will add a few perspectives on our current business. In the Lower 48, our momentum accelerated during the fourth quarter. We added four rigs in December and finished at the high watermark for the quarter, 62 rigs. Since then, we have added more rigs. Our rig count recently stood at 66. The additions are mainly for public operators. They are spread across producing areas with four in the Permian, three in the Eagle Ford, and two in the Haynesville. This diversity is encouraging; it suggests favorable operator economics across basins. Next, I will spend a moment on SANAD, our joint venture in Saudi Arabia. The newbuild fleet there continues to expand.

SANAD deployed the fourteenth newbuild during the fourth quarter. Five more rigs are planned to commence work during 2026, bringing the total to 19. The twentieth should start up in early 2027. During the fourth quarter, SANAD received notices for two of its three suspended rigs to resume operations. The first is scheduled to start up late this quarter. The second, late in the second quarter. The rigs will work under their existing contracts, their contract terms extended by the suspension period. SANAD recently elected not to renew three of its owned rigs. These were contributed by our partner to the JV during its formation. These smaller rigs in effect operated as workover rigs.

They generated very little EBITDA and free cash flow. The JV is evaluating alternatives to return them to work. In the meantime, SANAD can utilize the experienced crew from these rigs on its planned deployments during the quarter. This should help mitigate the effects of a tight labor market in the Kingdom. Across other markets in the Eastern Hemisphere, we are seeing potential activity growth. Currently, we are tracking nearly 20 opportunities for additional rigs in countries where we currently operate. This total sends an encouraging signal on the state of the Eastern Hemisphere market. In Latin America, the activity outlook in Mexico has improved. We currently have three offshore platform rigs working.

With the improvement in our clients’ payment posture, as Miguel will discuss, we see the potential for a more stable operating cadence there. We expect to restart a fourth platform rig there early this year. Turning to Argentina, we expect to start one rig this quarter. We have a second rig scheduled to start work there in the third quarter. That deployment would bring our rig count in Argentina to 14. That is up one from our last earnings call. Our leading position in this market enables us to opportunistically capture additional work. Next, I will comment on the U.S. market. Thus far, we have not seen oil prices at the level that concerned us a quarter ago.

The Baker Hughes weekly Lower 48 land rig count decreased by three rigs from September through December. This trend continues the apparent stability we saw in the third quarter. We again surveyed the expected drilling activity of the largest Lower 48 operators. This group accounted for approximately 42% of this market’s working rig count at the end of the quarter. Taken together, these operators expect the rig count to remain largely stable through 2026. Looking more closely, two companies indicate declines; the rest are essentially unchanged, with a few indicating small increases. Now I will make some comments on the key drivers of our results. I will start with our International Drilling segment.

This business has been relatively stable compared to the high volatility in the U.S. In recent years and looking to the future, international markets are a source of growth. We see prospects across the Middle East, Asia Pacific, and in Latin America. We will focus on opportunities that benefit from our advanced technology, offer long-term visibility with multiyear contracts, and generate attractive returns. In Saudi Arabia, beyond the pending additions I mentioned earlier, SANAD continues to advance discussions with its client for the fifth tranche of newbuild rigs. We expect these to conclude in the coming months. This tranche will bring the total number of newbuilds to 25. Now I will discuss our performance in the U.S.

In the fourth quarter, our daily gross margin in the Lower 48 exceeded our guidance. This resulted from our disciplined approach to pricing and our ability to reduce operating costs. With our performance in the fourth quarter, and guidance for the first quarter, we believe our daily margin is stabilizing. Before moving on, I will offer an update on our high-end rigs including the PACE-X Ultra. The first unit has been working for Coterra in South Texas since mid-September. We had high expectations for this rig. It has delivered. We are now working toward an agreement to deploy a second PACE-X Ultra. This powerful rig is an upgrade to our existing PACE-X rigs.

The PACE-X Ultra combines a 10 thousand PSI mud system, high-end racking and mast capacity, and an upgraded high-torque, high-HP top drive. As an upgrade, the PACE-X Ultra is cost effective for both us and for our clients. As this rig continues to prove its value, we are confident that interest in it will grow further. We are working with another operator to upgrade an existing PACE-X rig with higher setback capacity. This upgraded unit has been tagged to drill the operator’s four-mile lateral wells, its longest in the Permian Basin. We are also in discussions to simply upgrade a PACE-X rig for South Texas. We are encouraged by these developments.

Having multiple operators select our high-end drilling technology demonstrates the versatility and capability we can deliver to the market. At the same time, we generate attractive returns on these investments. Next, let me discuss our technology and innovation. An integral element of our PACE-X Ultra rig is the full automation package supplied by Nabors Drilling Solutions. We also integrate our managed pressure drilling package, and we provide casing running services. Looking more broadly, our penetration of Nabors Drilling Solutions services on Nabors Industries Ltd.’s own rigs in the Lower 48 was stable. We averaged seven services per rig. Our strategy for Nabors Drilling Solutions to target third-party rigs continued to pay off.

In this segment, Nabors Drilling Solutions outperformed the market. In the fourth quarter, on third-party rigs in the Lower 48, Nabors Drilling Solutions revenue excluding Quail increased sequentially by 10%. That increase came into a market where the third-party average rig count increased by just 1%. Nabors Drilling Solutions remains a key element in our strategy. Its services generate value for clients and, with the low capital intensity, for Nabors Industries Ltd. as well. I will finish my update this morning with some comments on our capital structure. We have said many times our highest priority remains the reduction of our debt. We made considerable progress over the last year. Our net debt is down by more than $550 million.

It stands at the lowest level since 2005. This improvement is also contributing to our free cash flow as our interest expense declines. Going forward, with our expectation to generate free cash flow outside SANAD, we are committed to further debt reduction. I will conclude my remarks with the following. Our outlook for 2026 envisions EBITDA performance that matches last year’s. We forecast increases in several of our operations. Those should offset the disposition of Quail. This prospect demonstrates the strong earnings power we have across our company. Now let me turn the call over to Miguel to discuss our financial results in detail.

Miguel Rodriguez: Thank you, Anthony, and good morning, everyone. I will begin by reaffirming our unwavering commitment to continue to strengthen our balance sheet and enhance 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 2.6% 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. These results exceeded the expectations we laid out in October. In absolute dollars, EBITDA decreased $15 million, or 6.2% versus the third quarter, driven primarily by the divestiture of Quail. In the third quarter, Quail contributed EBITDA of $20 million.

Excluding this impact, our EBITDA grew by 2.6%, led by our International Drilling Operations, Nabors Drilling Solutions, and Rig Technologies segments. These gains were partially offset by a decline of just 1% in our U.S. Drilling segment. EBITDA from Alaska and offshore combined exceeded the guidance for our last earnings call, as these operations experienced fewer maintenance days than anticipated. Lower 48 EBITDA improved sequentially and was approximately 6% above our guidance. Now I will provide you with details for each of the segment results. International Drilling revenue was $424 million, growth of $17 million, or 4.1% sequentially.

EBITDA for the segment was $131 million, increasing $4 million, or 2.9% quarter over quarter, yielding an EBITDA margin of 31%, down 35 basis points. International Drilling EBITDA increased sequentially though it came in modestly below the guidance provided on our last earnings call. Our average daily rig margin of $17,130 decreased sequentially by $301 and was below the lower bound of our guidance. The daily margin shortfall was mainly driven by a combination of activity disruptions in Colombia during most of the quarter impacting our logistics and drilling plans, more maintenance days than anticipated in Saudi Arabia based on updates to our customer’s drilling schedule, and some inefficiencies from rig startups during the quarter.

These were partially offset by stronger activity than planned in Mexico. During the fourth quarter, International Drilling average rig count increased by four rigs to 93.3, exceeding our expectations by 2.3 rigs. In addition to the full-quarter contribution from rigs that commenced in the third quarter, the strong growth in average rig count mainly reflects the deployment of our newbuild in Saudi Arabia, two rigs deployed in Argentina, and the rigs that we expected to be suspended in Mexico due to activity and budget allocation uncertainty continued to operate through the quarter. We exited the quarter with 94 rigs operating. Moving on to U.S. Drilling. Fourth quarter revenue was $241 million, reflecting a 3.7% sequential decline.

EBITDA totaled $93 million, a decrease of 1% sequentially, resulting in an EBITDA margin of 30.7%, an improvement of 105 basis points. These results exceeded the guidance for our last earnings call due to a stronger-than-expected performance in our Lower 48 business, with Alaska and offshore also modestly above our outlook. Looking specifically at the Lower 48, revenue of $180 million decreased by $4 million, or 2.2% sequentially, on a modest increase in average rig count of 0.6 to 59.8 rigs, despite ongoing commodity price volatility and broader market challenges. This is higher than the upper band of the guidance range we provided during the last earnings call. We exited the fourth quarter with 62 rigs operating.

Our rig count ramped higher toward the latter part of the quarter as we capitalized on opportunities to add rigs in the Eagle Ford Shale and the Permian, and currently, there are 66 rigs working. We are very pleased with the progress in a rather complex market at present. Average daily revenue declined by $1,079 to $32,938. The majority of the variance was driven by lower reimbursables, which have minimal impact on margins. Approximately $250 of the decrease was attributable to the base dayrate, which remained largely consistent with prior quarters. In our most recently signed contracts, expected daily revenue remains in the low-$30,000 range, unchanged from prior quarters.

Average daily margin of $13,303 increased by $152, or 1.2%, reflecting a relatively stable base daily revenue and the benefits of cost absorption and optimization initiatives including reduction in repairs and maintenance expense. Turning to Alaska and U.S. offshore. On a combined basis, our Alaska and offshore drilling operations generated revenue of $59 million in the fourth quarter, a 7.9% decrease sequentially. EBITDA was $26 million, down $2 million. EBITDA margin was 43.9%, essentially in line with Q3 and moderately above our guidance. We are experiencing changes in the scope and mix of work in these markets. In the medium to long term, however, we expect operations in Alaska to remain strong.

Our Drilling Solutions segment generated revenue of $108 million in the fourth quarter and EBITDA of $41 million, resulting in EBITDA margin of 38.3%. In the third quarter, Quail revenue and EBITDA were $34 million and $20 million respectively. Normalized for the sale of Quail, Nabors Drilling Solutions revenue increased slightly and EBITDA grew by 2.3% versus the third quarter. Nabors Drilling Solutions EBITDA margin excluding Quail was 37.5% in the third quarter, representing a sequential improvement of 83 basis points in the fourth quarter driven by international growth across services, including casing running, managed pressure drilling, and performance software. Now on to Rig Technologies.

Revenue was $38 million in the fourth quarter, a sequential increase of 6%, and EBITDA was $5 million, up $1 million from the prior quarter. The improvement is predominantly related to year-end equipment sales. Next, let me outline our expectations for the first quarter and full year. Starting with the quarter on U.S. Drilling. Given our strong position in a number of Lower 48 basins and current market conditions, we expect a sequential increase in average rig count to a range of 64 to 65 rigs. This includes our anticipation of some level of rig churn during the quarter. For the first half of the year, we expect activity in our Lower 48 drilling business to remain relatively steady.

Daily adjusted gross margin for the first quarter is expected to average approximately $13,200, with base daily revenue remaining largely stable. Rig additions during the quarter will incur some higher startup-related costs. For Alaska and U.S. Offshore drilling combined, we expect EBITDA in the range of $16 million to $17 million for the quarter. This outlook reflects a step down in daily margins driven primarily by a change in the scope of work of our marquee offshore platform rig, as well as reduced activity levels in Alaska. International Drilling average rig count is expected to be in the range of 91 to 92 rigs.

This reflects the commencement of the fifteenth newbuild rig in Saudi Arabia, the redeployment of one of the suspended rigs in the latter part of the quarter also in Saudi Arabia, the redeployment of one rig in Argentina, and the full-quarter contribution from rig startups that began in the fourth quarter. These additions are partially offset by a decline of three very low-margin workover rigs in Saudi Arabia. As Anthony mentioned, SANAD elected not to renew those contracts for economic reasons. The drop of these rigs will have no material impact on our full-year international EBITDA and cash flow progression.

We expect average daily gross margin to be essentially in line with the fourth quarter, in the range of $17,500 to $17,600. While this reflects the benefit of our robust rig additions, we also expect some seasonal slowdown in the Middle East and the conclusion of certain short-term high-margin activities during the quarter. Drilling Solutions EBITDA is expected to be approximately $39 million, reflecting a marginal decline in both the U.S. and international markets. Finally, Rig Technologies EBITDA should be approximately $2 million. For the full year, we expect our EBITDA to grow by 6% to 8% normalized for Quail, with continued growth of our International and Nabors Drilling Solutions businesses.

We will aim to maintain the same EBITDA level as reported in 2025. Starting with U.S. Drilling, we expect the Lower 48 to average 61 to 64 rigs, reflecting a cautious view for the second half of the year. Average daily gross margin is expected to range between $13,030 and $13,400. Alaska and offshore combined EBITDA of $55 million to $60 million. For International Drilling, we expect average rig count of 96 to 98 rigs, with a December exit at or above 101 rigs. This growth includes commencements in Saudi with five Kingston newbuilds during the year, and two suspended rigs returning to work in the first half of the year.

In addition, we expect to redeploy two rigs in Argentina. Average daily gross margin is targeted at $18,500, or up 5%, as we continue to deploy rigs at better pricing levels. I do want to note our full-year guidance does not factor any reactivation of our five available rigs in Venezuela. Nabors Drilling Solutions EBITDA is expected to grow by 6% to 7%, normalized for Quail, to reach $160 million to $170 million, largely led by strong growth in international markets. Finally, Rig Technologies EBITDA is expected to range between $22 million and $25 million. Now I will provide an update on our integration of Parker, which is progressing in line with our expectations.

As previously discussed, following the sale of Quail, Nabors Industries Ltd. retained the remaining Parker operations. I am pleased to report that we achieved our 2025 EBITDA target for these businesses of approximately $55 million post acquisition and including synergies. During the fourth quarter, we realized synergies at an annualized run rate of $63 million. This is slightly above our already ambitious target of $60 million and demonstrates our agility and, lastly, our focus on execution. We remain on track to generate at least $70 million of EBITDA in 2026 from the retained Parker businesses, supported by the full run-rate impact of synergies and the continued robust performance of these operations.

We are very pleased with the progress of the Parker integration and the pace of the synergy realization. The combined organization is well positioned to continue delivering both operational and financial benefits in the quarters ahead. Next, I will discuss our capital allocation, adjusted free cash flow, and liquidity. In the fourth quarter, total capital expenditures were $158 million, lower than the guidance provided on our prior earnings call. This amount includes $78 million related to the Kingston newbuild program, also below our guidance. Total CapEx in the third quarter was $188 million. Capital expenditures in 2025 totaled $695 million, including $274 million for the SANAD newbuilds. Looking ahead, we will maintain our disciplined approach to capital investments.

For the first quarter, we anticipate capital expenditures between $170 million and $180 million, including approximately $85 million supporting the newbuild rigs. For the full year 2026, we are targeting capital expenditures in the range of $737 million to $760 million, including $360 million to $380 million for SANAD newbuilds. The increase of roughly $100 million in the Kingston newbuild spend primarily reflects the number of construction milestones that shifted from 2025 into 2026. This increase should be partially offset by lower expected reactivation in our international operations, as we completed several redeployments in 2025 in a number of markets and do not expect to repeat the same quantum of associated spending.

We also expect to reduce capital spending in Nabors Drilling Solutions following the sale of Quail. Supported by customer demand, we will continue to invest in key automation projects as well as selectively high-grading our rigs in the Lower 48. Turning to free cash flow. During the fourth quarter, we generated adjusted free cash flow of $132 million. This exceptional performance drove our full-year adjusted free cash flow to approximately $117 million, significantly exceeding our revised post-Parker guidance of approximately $80 million. The outperformance in the quarter was driven by a combination of factors including stronger EBITDA, lower-than-expected capital expenditures, and higher-than-anticipated collections in Mexico, helping drive a sequential working capital improvement of approximately $40 million.

A sizable percentage of our 2024 Mexico receivables were settled by PEMEX in the fourth quarter, in addition to timely payment of a meaningful portion of our 2025 services—a major step forward in Mexico. In addition, our quarter benefited from one-time claim settlements. For the full year 2025, SANAD consumed approximately $55 million in adjusted free cash flow. Excluding SANAD, the rest of our business units generated approximately $175 million—a remarkable delivery for the year. For the first quarter, we expect to consume $80 million to $90 million of consolidated adjusted free cash flow, with SANAD alone consuming approximately $50 million to $60 million.

In addition, our first quarter is normally loaded with heavier cash interest payments, annual bonuses, and property taxes. For the full year 2026, we expect SANAD’s adjusted free cash flow to consume between $100 million and $120 million, with the rest of our businesses generating in the range of $80 million to $90 million. With these funds and some cash in hand, we plan to further reduce Nabors Industries Ltd.’s gross debt by at least $100 million during the year. Now I would like to make a few comments regarding our progress on our capital structure during the fourth quarter and our subsequent actions that reduce gross debt.

I will also highlight the broader progress achieved over the course of the year. In early October, we received $250 million from Superior, representing an early payment of the seller financing note completing the consideration for the sale of Quail. In early November, we issued $700 million of 7.58% senior priority guaranteed notes due November 2032. Proceeds from this issuance were used to retire the remaining $546 million of outstanding senior priority guaranteed notes maturing in May 2027. Subsequent to quarter end, we redeemed the remaining $379 million of senior guaranteed notes maturing in 2028, effectively extending our maturity runway to June 2029 with a very manageable $250 million maturity.

As a result of these actions, two of the credit rating agencies upgraded ratings on elements of Nabors Industries Ltd.’s debt structure. Stepping back and looking at the year more broadly, we made substantial progress through several major transformational transactions, as previously mentioned by Anthony, that meaningfully enhance our capital structure. As a result, we improved our credit ratings, extended our maturity profile into 2029 with a weighted average maturity increasing to 5.3 years from 3.7 years as of the third quarter, reduced net debt by more than $554 million, and improved our net leverage ratio to approximately 1.7 times, the lowest since 2008.

These are significant accomplishments, and I want to thank everyone involved at Nabors Industries Ltd. for their efforts and execution. With that, I will turn the call back over to Anthony.

Anthony Petrello: 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 highest-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 newbuilds at five 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 will now take your questions.

Operator: We will now begin the question and answer session. 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 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Derek Podhaizer with Piper Sandler. Please go ahead.

Derek Podhaizer: Hey, good morning. Just wanted to start with your Lower 48 outlook. You have talked about the rig count increasing to that 64 to 65 range. That is from 60 just in the quarter. This bucks the trend a little bit from some of the other drillers that we have heard over the last couple of weeks. Anthony, like in your opening comments, it is more public E&P driven. But maybe could you just expand on the 66 rigs?

Anthony Petrello: 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 shifting, and that has resulted in Nabors Industries Ltd. shifts as well. So if you look at our mix right now, we are now 80% public and our gas rig count is 20%, which is up double from where we were before. The other thing that is interesting is looking at the type of drilling that is going on, which is the longer laterals. The trend is clearly in that direction. I will give you some statistics here.

If you look at West Texas, the change in West Texas of laterals of three- or four-mile laterals, that bucket accounted for 19% of our wells in 2025 versus 12% in 2024. The growth in laterals generally for us, in terms of pushing more than three-mile laterals, was 25% in 2025. That is up from 15% to 16% in 2024. If you look at the number of four-mile laterals, which is a really small share, that number actually quadrupled as a percentage. Why is that important? That is important because Nabors Industries Ltd. has a fleet of PACE-X rigs that are well suited to drilling these kinds of wells.

And you saw from the Ultra, we have actually improved on our base case on that as well. All that, I think, has positioned us really well in the market. We remain pretty bullish on the long-term picture for gas, and we think that oil has been well played as well. In summary, on top of that, we have basically just maintained discipline and focused 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. I am pleasantly surprised by the commodity price as I mentioned. We think we are in a great position right now going forward.

Miguel Rodriguez: Got it. If I may add as well, if you look at the remainder of the year, we are looking at the second half with a lot of caution given what is going on in the market. But we are very confident about our customers and our team keeping the momentum. And as a reminder, the outlook that we have provided for the full year really translates into a small number of rigs going up versus 2025. And the range that we provided is quite short relative to our peers, if you will.

Derek Podhaizer: Right. Okay. Understood. That was helpful. I will turn it back, and I will jump back in line. Thank you.

Anthony Petrello: Thanks.

Operator: The next question comes from Keith McKee with RBC. Please go ahead.

Keith McKee: Hi, good morning. Can you comment a little bit more on what you are seeing on the ground in Saudi Arabia? I know the SANAD newbuild program looks like it is moving along quite well. But certainly, in the Kingdom, there are going to be a number of rigs to be activated throughout the year. And Anthony, as you mentioned, the labor market over there is fairly tight. So can you comment on your confidence around timelines that both the reactivation rigs and the newbuild 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?

Anthony Petrello: Sure. Let us put the whole thing in some context. Right now, the rig count in the Kingdom, I think, is about 168 on land, offshore about 60. I think there are about 35 LSTK rigs working, which is around 260-plus rigs in the Kingdom. At the market peak, 80 land rigs were idled, and 23 came into the market, so that is a net down of 57. And I think we have heard that there are 40 rigs out of 83 that were suspended that received notices to return to drilling.

Two of the three are obviously SANAD, and we are highly confident those two rigs are going on the schedule I just outlined, which is the second and third quarter. There is no question about that from our point of view. But for everybody else, that leaves dozens of rigs that still have to go back to work, and I think the labor market is heating up over there. Given our position in the Kingdom and our vertical integration, we have no problem with those rigs, and we have no problem with the five newbuilds at all. We are highly confident of our rig count going forward there.

I think the large-scale resumption of Aramco putting back all these rigs to work—nearly half, I think, they have—are in the process of going back. It is an incredibly positive signal to the market. The macro takeaway is that Aramco is usually ahead of the market in terms of where it sees things going. I think this means that 2027 is being looked at as a good year, and they are able to position to do that. That is my own read on it.

Miguel Rodriguez: Just one comment. 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.

Keith McKee: Got it. That is very helpful. Thank you for the color. I will turn it back.

Anthony Petrello: Thanks.

Operator: Next question comes from Scott Gruber with Citigroup. Please go ahead.

Scott Gruber: Yes, good morning. I wanted to ask a question on Mexico. Good to hear that the platform rig will be going back to work, but we have 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? And then I think there was $50 million to $60 million of CapEx that may have slid from 2025 to 2026 within the SANAD newbuild program. Is that for a five-rig annual cadence? And how should we think about the run-rate program in terms of CapEx—is it still about $300 million, or is it a bit higher now?

Anthony Petrello: Right now, the fourth platform rig is there, and there have always been other discussions about supporting other rigs there. We actually have some other services where we are supporting other rigs, including PEMEX’s own rigs there, in addition. But right now, we are really focused on making these three really profitable and the fourth one moving forward. Yes, I think the market is a little more positive, and obviously the payment mechanism turning around is a big deal.

Miguel Rodriguez: On CapEx, 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 that the right way to think about the upcoming years is probably 2026 around the $360 million to $380 million we guided, with 2027 going down from these levels because we will be catching up in 2026—maybe 2027 around the $320 million to $330 million. That is probably the right way to think about it, which factors correctly the five rigs built.

Anthony Petrello: The only thing I would add, Scott, is I saw your write-up last night, and I think when you analyze the situation, you cannot look at the consolidated free cash flow number. I think that is a misnomer. You have to look at SANAD and its needs, and its needs are satisfied by SANAD. Nabors Industries Ltd., 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. So this notion that there is a concern about ability to meet net debt reduction is not the full picture.

The other point I would make is if you look at our portfolio as a whole—if you look at International as a whole—when you count the Saudi rigs of five plus the two coming back to work to seven, and then there are another three rigs—the Mexico rig and two Argentina—that is 10 rigs. If you look at 2024, Nabors Industries Ltd. added nine net rigs. This year, we are hitting 10. There is nobody in the industry that has that kind of visibility, and all those are locked in. Beyond that, there are these five-rig programs additionally.

When you look at the value of Nabors Industries Ltd.’s 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—our number one oil company partner in the world in the largest market in the world. I do not think that analysis takes that into account, particularly in the analysis of the free cash flow. I just thought I would share that with you.

Scott Gruber: I appreciate the comments. I just think from a high level, people have been waiting for that consolidated free cash inflection point, and it does seem to be approaching. I think, with the momentum—

Miguel Rodriguez: To be honest, we remain on pace with what we have been communicating on when we expect SANAD to cross over. As you can see from what we originally guided for 2025—a consumption of $150 million—we ended the year, because of the CapEx moving from one year to another, at $55 million. But the guidance of 2026 in terms of cash flow consumption is much lower than what was guided for 2025, 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 2027, you will be very close to the turning point in terms of crossing over.

Anthony Petrello: The other thing is, if 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 seven years, and their free cash flow payouts are closer to ten years. Our investments are orders of magnitude better than any of those in terms of deals that have been made elsewhere in the Kingdom for sure. Again, that is why I strongly believe that the value that you need to put on this is much higher than what has been recognized so far.

Scott Gruber: Appreciate it. We look forward to the inflection. Thanks, guys.

Anthony Petrello: Thank you.

Operator: The next question comes from John Daniel with Daniel Energy Partners. Please go ahead.

John Daniel: Guys, thanks for including me. 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 E&P M&A, efficiencies, etc.?

Anthony Petrello: It is more you just cut the constant external noise—the EIA, even as of last week, talking about oversupply—and the market’s reaction. Even though I do not think the market is logical; when people think Iran is going to have a blow-up or Ukraine gets resolved, then all of a sudden the market goes the other way. I do not think that is well founded because the oil market, on the physical side, turning is more like turning a derrick barge than it is a speedboat. But the reactions are that way, and obviously those kinds of swings we are still subject to. So it is really that more than anything really cracking here.

As I said, we have been pleasantly surprised, and you can see from our progress so far we are doing pretty well. But we are cautious, and we have everybody really focused on the cost structure here to plan for if the downside does occur. That is the way we are thinking about it.

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

John Daniel: 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 Industries Ltd., and just a little bit more color on the cycle time improvement?

Anthony Petrello: Sure. Basically, what this wrench is—it is a three-bite wrench as opposed to the standard two-bite wrench, and it is loaded with feedback and automation. As you know, we have our RZR rig out there, and this will be another component in that, where eventually we are going to be capable of being in fully autonomous mode. In its initial dressing on the first couple wells the past month or so, it has a stellar record of one-bite grabs because of all this automation and sensors. For the larger pipe that people are using for the more complicated wells, this wrench is well suited to that as well. We are highly positive about it.

We have actually had drilling contractors come and look at the wrench. The initial reaction is really high. Our first priority is to get some of these onto Nabors Industries Ltd.’s rigs, and then we are hoping that CANrig will actually have a lot of third-party demand for these wrenches as well. We are really happy with it.

Operator: Okay. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Conroy for any closing remarks.

William Conroy: Thanks very much, everyone, for participating. If you have any questions, please do not hesitate to follow up with the IR team. With that, we will wrap up here.

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