EX-99.1 3 h07741exv99w1.txt PRESS RELEASE ISSUED JULY 29, 2003 EXHIBIT 99.1 (NABORS INDUSTRIES LOGO) NEWS RELEASE NABORS NET $0.19 ON STRONGER US BUSINESS ST. MICHAEL, BARBADOS, JULY 29, 2003, NABORS INDUSTRIES LTD. (AMEX: NBR), today announced its results for the second quarter and six months ended June 30, 2003. Adjusted income derived from operating activities(1) was $38.0 million for the current quarter compared to $37.5 million in the second quarter of last year and $56.0 million in the first quarter of this year. Net income was $29.0 million ($0.19 per diluted share) for the current quarter compared to $25.4 million ($0.17 per diluted share) in the prior year and $48.1 million ($0.31 per diluted share) in the first quarter of this year. Operating revenues and earnings from unconsolidated affiliates were $433.9 million in the current quarter compared to $356.5 million in the prior year quarter and $455.7 million in the first quarter of this year. For the six months ended June 30, 2003, adjusted income derived from operating activities was $94.0 million compared to $98.6 million in 2002. Net income for the first six months of 2003 was $77.1 million ($0.50 per diluted share) compared to $67.4 million ($0.45 per diluted share) in the first six months of 2002. Revenues and earnings from unconsolidated affiliates for the first six months were $889.7 million compared to $743.4 million for the first six months of 2002. Gene Isenberg, Nabors' Chairman and Chief Executive Officer commented on the results, "Our second quarter results were modestly ahead of our expectations as a result of higher activity and margins in our US Lower 48 land drilling, well servicing and offshore businesses." "Comparing to the sequential first quarter of 2003, the largest improvement came from our US Lower 48 land drilling unit where we experienced a progressively higher rig count during the quarter and correspondingly better margins. Our international unit achieved a substantial increase each month during the quarter as the contribution from recently deployed platform rigs became more closely attuned to their planned level. Our US land well servicing unit posted a strong showing on higher hours and expanded margins. Our US offshore operation also showed solid improvement as two of our Super-Sundowner(TM) class platform rigs commenced new deepwater SPAR contracts bringing this segment of our fleet to full capacity utilization. Higher utilization and pricing among our platform drilling and jackup workover rigs also added to the quarter. The seasonally lower levels of activity and substantially lower results in our Canadian and Alaskan operations were as expected." "Our outlook for the third quarter and full year 2003 continues to be quite positive as all of our businesses except Alaska anticipate sequential quarterly improvement for the foreseeable future. Canada is rapidly emerging from its second quarter seasonal trough with a much higher rig count and stronger rates. In our US Lower 48 land drilling business we expect steady improvement with the continuation of the same market conditions that led to a better than expected second quarter. Internationally, significant sequential increases should continue with land rigs returning to work in several regions, the mobilization of a new offshore ---------- (1) Adjusted income derived from operating activities is computed by subtracting:direct costs, general and administrative expenses, and depreciation and amortization expense from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under accounting principles generally accepted in the United States of America (GAAP). A reconciliation of this non-GAAP measure to consolidated income before taxes, which is a GAAP measure, is provided herein. platform rig for Indonesia, and fuller contribution from recently deployed platform rigs in Mexico and India. The longer-term outlook for this unit is particularly good, given the long-term nature of the recent platform rig deployments, continuing strong bid flow and the number of strategic opportunities on the horizon. Our US offshore business anticipates further increments, the most visible component being recent and future rig deployments on deepwater projects. Our US well servicing business continues to outperform our expectations and we look for a steady to slightly upward trend in results. Our manufacturing and transportation units also anticipate higher results despite a somber outlook for our construction and logistics joint ventures in Alaska. These Alaskan joint ventures along with our Alaskan drilling unit are the only areas where we have lower expectations over the course of the year as spending by the largest operator in that region continues to be curtailed. We are however, encouraged by the influx of new independent operators in this market who are aggressively pursuing exploratory and development projects, reinforcing our expectation of a strong winter season." "During the quarter we were able to capitalize on the favorable debt markets to further reduce our average cost of capital. In June we placed $700 million of zero-coupon, zero-yield, twenty year convertible bonds. A large portion of the proceeds from this placement were used to redeem approximately $495 million in zero coupon convertible bonds which carried a 2-1/2% yield. We further intend to redeem $295 million of 6.8% senior notes when they mature in April of 2004. Together these two redemptions will reduce annual interest expense by over $30 million." "We remain convinced that the North American gas markets will require higher levels of drilling for an extended period to meet the supply challenges. Our Canadian business appears to be heading for a record third quarter and a record year, and that market has been a reliable predictor of US Lower 48 activity. Our view of an enduring North America gas directed cycle and strong growth characteristics in our international business reinforce our conviction that the current upward trend in our results is sustainable for an extended period." The Nabors companies own and operate almost 600 land drilling and approximately 950 land workover and well-servicing rigs worldwide. Offshore, Nabors operates 43 platforms, 16 jack-ups, and three barge rigs in the domestic and international markets. Nabors markets 30 marine transportation and support vessels, primarily in the U.S. Gulf of Mexico. In addition, Nabors manufactures top drives and drilling instrumentation systems and provides comprehensive oilfield hauling, engineering, civil construction, logistics and facilities maintenance, and project management services. Nabors participates in most of the significant oil, gas and geothermal markets in the world. The information above includes 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 its filings with the Securities and Exchange Commission. As a result of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements. ---------- For further information, please contact Dennis A. Smith, Director of Corporate Development of Nabors Corporate Services, Inc. at (281) 775-8038. To request Investor Materials, call Angela Ridgell at (281) 775-8063 or our corporate headquarters in St. Michael, Barbados at (246) 421-9471 or via email at dan.mclachlin@nabors.com. Nabors will conduct a conference call to discuss the quarter's results and the near-term outlook, today at 12:00 p.m. Eastern Daylight Time. The call can be accessed on our website at www.nabors.com, or through First Call at www.firstcallevents.com NABORS INDUSTRIES LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED ------------------------------------- SIX MONTHS ENDED MARCH 31, JUNE 30, JUNE 30, --------- ----------------------- ----------------------- 2003 2003 2002 2003 2002 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues and other income: Operating revenues (1) $ 449,837 $ 432,552 $ 352,147 $ 882,389 $ 733,346 Earnings from unconsolidated affiliates (1) 5,903 1,359 4,371 7,262 10,009 Interest income 7,693 6,998 8,142 14,691 17,393 Other income, net 24 23 2,649 47 3,146 --------- --------- --------- --------- --------- Total revenues and other income 463,457 440,932 367,309 904,389 763,894 --------- --------- --------- --------- --------- Costs and other deductions: Direct costs 304,560 298,791 238,190 603,351 487,623 General and administrative expenses 41,245 40,483 32,824 81,728 65,490 Depreciation and amortization 53,926 56,652 47,984 110,578 91,665 Interest expense 20,070 18,644 14,418 38,714 29,033 --------- --------- --------- --------- --------- Total costs and other deductions 419,801 414,570 333,416 834,371 673,811 --------- --------- --------- --------- --------- Income before income taxes 43,656 26,362 33,893 70,018 90,083 --------- --------- --------- --------- --------- Income tax (benefit) expense: Current 4,060 3,226 2,514 7,286 6,957 Deferred (8,461) (5,883) 5,959 (14,344) 15,764 --------- --------- --------- --------- --------- Total income tax (benefit) expense (4,401) (2,657) 8,473 (7,058) 22,721 --------- --------- --------- --------- --------- Net income $ 48,057 $ 29,019 $ 25,420 $ 77,076 $ 67,362 ========= ========= ========= ========= ========= Earnings per share (2): Basic $ .33 $ .20 $ .18 $ .53 $ .47 Diluted $ .31 $ .19 $ .17 $ .50 $ .45 Weighted average number of common shares outstanding (2): Basic 145,708 146,382 143,188 146,045 142,079 --------- --------- --------- --------- --------- Diluted 160,404 153,359 150,451 160,487 148,556 --------- --------- --------- --------- --------- Adjusted income derived from operating activities (3) $ 56,009 $ 37,985 $ 37,520 $ 93,994 $ 98,577 ========= ========= ========= ========= =========
---------- (1) During the fourth quarter of 2002 we revised the classification of revenues for certain rigs that we own that are leased to our joint venture in Saudi Arabia, in which we have a 50% ownership interest. We now report 100% of these revenues as Operating revenues. Previously, we had reported 50% of these lease revenues as Earnings from unconsolidated affiliates and 50% as Operating revenues. The effect of this change in classification resulted in an increase in Operating revenues and offsetting decrease in Earnings from unconsolidated affiliates of $6.1 million and $11.4 million for the three and six months ended June 30, 2002, respectively. These reclassifications had no impact on total revenues and other income, or net income. (2) See "Computation of Per Share Earnings" included herein as a separate schedule. (3) Adjusted income derived from operating activities is computed by: subtracting direct costs, general and administrative expenses, and depreciation and amortization expense from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under accounting principles generally accepted in the United States of America (GAAP). However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income derived from operating activities, because it believes that this financial measure is an accurate reflection of the ongoing profitability of our company. A reconciliation of this non-GAAP measure to consolidated income before income taxes, which is a GAAP measure, is provided herein. NABORS INDUSTRIES LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, MARCH 31, JUNE 30, 2002 2003 2003 ------------ ---------- ---------- (IN THOUSANDS, EXCEPT RATIOS) ASSETS Current assets: Cash and marketable securities $ 871,651 $ 816,643 $1,050,450 Accounts receivable, net 277,735 351,507 336,308 Other current assets 220,522 220,601 215,492 ---------- ---------- ---------- Total current assets 1,369,908 1,388,751 1,602,250 Marketable securities 459,148 468,591 432,873 Property, plant and equipment, net 2,781,050 2,837,073 2,888,281 Goodwill, net 306,762 316,851 328,033 Other long-term assets 147,004 183,586 185,599 ---------- ---------- ---------- Total assets $5,063,872 $5,194,852 $5,437,036 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 492,985 $ 537,991 $ 298,007 Other current liabilities 258,469 308,655 275,736 ---------- ---------- ---------- Total current liabilities 751,454 846,646 573,743 Long-term debt 1,614,656 1,575,079 1,990,138 Other long-term liabilities 539,307 525,480 523,658 ---------- ---------- ---------- Total liabilities 2,905,417 2,947,205 3,087,539 Shareholders' equity 2,158,455 2,247,647 2,349,497 ---------- ---------- ---------- Total liabilities and shareholders' equity $5,063,872 $5,194,852 $5,437,036 ========== ========== ========== Total cash and marketable securities $1,330,799 $1,285,234 $1,483,323 Working capital $ 618,454 $ 542,105 $1,028,507 Funded debt to capital ratio: - Gross 0.49 : 1 0.48 : 1 0.49 : 1 - Net of cash and marketable securities 0.26 : 1 0.27 : 1 0.26 : 1 Interest coverage ratio: 6.0 : 1 5.6 : 1 5.4 : 1
NABORS INDUSTRIES LTD. AND SUBSIDIARIES SEGMENT REPORTING (UNAUDITED) The following table sets forth certain information with respect to our reportable segments and rig activity:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------- ----------------------- MARCH 31, JUNE 30, JUNE 30, --------- ----------------------- ----------------------- 2003 2003 2002 2003 2002 --------- --------- --------- --------- --------- (IN THOUSANDS) Reportable segments: Operating revenues and Earnings from unconsolidated affiliates: Contract drilling: (1) U.S. Lower 48 Land Drilling $ 91,688 $ 116,605 $ 97,022 $ 208,293 $ 206,181 U.S. Land Well-servicing 76,660 81,504 76,250 158,164 149,953 U.S. Offshore 21,714 24,680 23,958 46,394 51,430 Alaska 35,968 30,446 30,947 66,414 70,941 Canada 100,788 49,836 20,935 150,624 48,952 International 87,191 96,599 77,062 183,790 157,150 --------- --------- --------- --------- --------- Subtotal contract drilling (2) 414,009 399,670 326,174 813,679 684,607 Manufacturing and logistics (3) (4) 55,189 46,572 41,554 101,761 81,596 Other (5) (13,458) (12,331) (11,210) (25,789) (22,848) --------- --------- --------- --------- --------- Total $ 455,740 $ 433,911 $ 356,518 $ 889,651 $ 743,355 ========= ========= ========= ========= ========= Adjusted cash flows derived from operating activities: (6) Contract drilling: U.S. Lower 48 Land Drilling $ 14,051 $ 23,445 $ 23,723 $ 37,496 $ 51,809 U.S. Land Well-servicing 15,145 18,811 16,187 33,956 30,726 U.S. Offshore 1,103 5,112 1,150 6,215 3,111 Alaska 18,162 13,414 10,255 31,576 23,861 Canada 33,253 5,453 2,509 38,706 15,143 International 28,142 33,350 27,690 61,492 57,592 --------- --------- --------- --------- --------- Subtotal contract drilling 109,856 99,585 81,514 209,441 182,242 Manufacturing and logistics 10,867 4,883 13,000 15,750 26,709 Other (7) (10,788) (9,831) (9,010) (20,619) (18,709) --------- --------- --------- --------- --------- Total 109,935 94,637 85,504 204,572 190,242 Depreciation and amortization (53,926) (56,652) (47,984) (110,578) (91,665) --------- --------- --------- --------- --------- Adjusted income derived from operating activities (8) 56,009 37,985 37,520 93,994 98,577 Interest expense (20,070) (18,644) (14,418) (38,714) (29,033) Interest income 7,693 6,998 8,142 14,691 17,393 Other income, net 24 23 2,649 47 3,146 --------- --------- --------- --------- --------- Income before income taxes $ 43,656 $ 26,362 $ 33,893 $ 70,018 $ 90,083 ========= ========= ========= ========= ========= Net cash provided by operating activities from our consolidated statements of cash flows $ 26,033 $ 102,891 $ 91,322 $ 128,924 $ 194,685 ========= ========= ========= ========= ========= Rig activity: Rig years: (9) U.S. Lower 48 Land Drilling 108.9 136.8 105.6 123.0 106.6 U.S. Offshore 13.4 15.0 14.5 14.2 14.7 Alaska 8.7 9.1 9.6 8.9 10.4 Canada 58.8 23.4 11.4 41.0 19.2 International (10) 57.1 59.8 53.5 58.4 52.9 --------- --------- --------- --------- --------- Total rig years 246.9 244.1 194.6 245.5 203.8 ========= ========= ========= ========= ========= Rig hours: (11) U.S. Land Well-servicing 273,513 281,810 262,326 555,323 504,605 Canada Well-servicing (12) 92,702 46,458 30,528 139,160 30,528 --------- --------- --------- --------- --------- Total rig hours 366,215 328,268 292,854 694,483 535,133 ========= ========= ========= ========= =========
---------- (1) This segment includes our drilling, workover and well-servicing operations, on land and offshore. (2) Includes Earnings from unconsolidated affiliates, accounted for by the equity method, of $.9 million, $1.0 million and $1.0 million for the three months ended March 31, 2003, June 30, 2003 and 2002, respectively, and $1.9 million and $2.1 million for the six months ended June 30, 2003 and 2002, respectively. (3) This segment includes our marine transportation and supply services, top drive manufacturing, directional drilling, rig instrumentation and software, and construction and logistics operating units. (4) Includes Earnings from unconsolidated affiliates, accounted for by the equity method, of $5.0 million, $.4 million and $3.4 million for the three months ended March 31, 2003, June 30, 2003 and 2002, respectively, and $5.4 million and $7.9 million for the six months ended June 30, 2003 and 2002, respectively. (5) Includes the elimination of inter-segment manufacturing and logistics sales. (6) Adjusted cash flows derived from operating activities is computed by: subtracting direct costs and general and administrative expenses from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under GAAP. However, management evaluates the performance of our business units based on several criteria, including adjusted cash flows derived from operating activities, because it believes that this financial measure is an accurate reflection of the ongoing performance of our business units. The following is a reconciliation of net cash provided by operating activities from our consolidated statements of cash flows, which is a GAAP measure, to this non-GAAP measure:
(UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------- ----------------------- MARCH 31, JUNE 30, JUNE 30, --------- ----------------------- ----------------------- 2003 2003 2002 2003 2002 --------- --------- --------- --------- --------- (IN THOUSANDS) Net cash provided by operating activities from our consolidated statements of cash flows $ 26,033 $ 102,891 $ 91,322 $ 128,924 $ 194,685 Interest expense 20,070 18,644 14,418 38,714 29,033 Interest income (7,693) (6,998) (8,142) (14,691) (17,393) Other income, net (24) (23) (2,649) (47) (3,146) Current income tax expense 4,060 3,226 2,514 7,286 6,957 Deferred financing costs amortization (1,397) (1,323) (1,098) (2,720) (2,196) Discount amortization on long-term debt (7,908) (7,661) (7,673) (15,569) (15,270) Amortization of loss on cash flow hedges (37) (38) -- (75) -- Gains (losses) on long-term assets, net 2,440 837 (722) 3,277 (828) (Losses) gains on marketable securities (469) 3,096 476 2,627 2,950 Loss on derivative instruments (1,084) (2,617) -- (3,701) -- Sales of marketable securities, trading -- (4,484) -- (4,484) -- Foreign currency transaction (losses) gains (181) 532 2,354 351 2,307 Loss on early extinguishment of debt -- (908) -- (908) (202) Equity in earnings (losses) of unconsolidated affiliates, net of dividends 5,903 (4,141) (1,315) 1,762 2,124 Decrease (increase), net of effects from acquisitions, from changes in balance sheet accounts 70,222 (6,396) (3,981) 63,826 (8,779) --------- --------- --------- --------- --------- Adjusted cash flows derived from operating activities $ 109,935 $ 94,637 $ 85,504 $ 204,572 $ 190,242 ========= ========= ========= ========= =========
---------- (7) Includes the elimination of inter-segment transactions and unallocated corporate expenses. (8) Adjusted income derived from operating activities is computed by: subtracting direct costs, general and administrative expenses, and depreciation and amortization expense from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under GAAP. However, management evaluates the performance of its business units and the consolidated company based on several criteria, including adjusted income derived from operating activities, because it believes that this financial measure is an accurate reflection of the ongoing profitability of our company. A reconciliation of this non-GAAP measure to consolidated income before income taxes, which is a GAAP measure, is provided within the table above. (9) Excludes well-servicing rigs which are measured in rig hours. Includes our percentage ownership of rigs from unconsolidated affiliates. Rig years represents a measure of the number of equivalent rigs operating during a given period. For example, one rig operating 182.5 days during a 365-day period represents 0.5 rig years. (10) International rig years include our percentage ownership of rigs from unconsolidated affiliates which totaled 3.0 years during the three months ended March 31, 2003, and, 4.0 years and 3.5 years during the three and six months ended June 30, 2003 and 2002, respectively. (11) Rig hours represents the number of hours that our well-servicing rig fleet operated during the period. (12) The Canada Well-servicing operation was acquired during April 2002 as part of our acquisition of Enserco Energy Service Company Inc. NABORS INDUSTRIES LTD. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS (UNAUDITED) A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED -------------------------------- -------------------- MARCH 31, JUNE 30, JUNE 30, -------- -------------------- -------------------- 2003 2003 2002 2003 2002 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net income (numerator): Net income - basic $ 48,057 $ 29,019 $ 25,420 $ 77,076 $ 67,362 Add interest expense on assumed conversion of our zero coupon convertible senior debentures, net of tax: $825 million due 2020 (1) 1,920 -- -- 3,639 -- $1.381 billion due 2021 (2) -- -- -- -- -- -------- -------- -------- -------- -------- Adjusted net income - diluted $ 49,977 $ 29,019 $ 25,420 $ 80,715 $ 67,362 -------- -------- -------- -------- -------- Earnings per share: Basic $ .33 $ .20 $ .18 $ .53 $ .47 Diluted $ .31 $ .19 $ .17 $ .50 $ .45 Shares (denominator): Weighted average number of shares outstanding - basic (3) 145,708 146,382 143,188 146,045 142,079 Net effect of dilutive stock options and warrants based on the treasury stock method 6,589 6,977 7,263 6,783 6,477 Assumed conversion of our zero coupon convertible/exchangeable senior debentures/notes: $825 million due 2020 (1) 8,107 -- -- 7,659 -- $1.381 billion due 2021 (2) -- -- -- -- -- $700 million due 2023(4) -- -- -- -- -- -------- -------- -------- -------- -------- Weighted average number of shares outstanding - diluted 160,404 153,359 150,451 160,487 148,556 -------- -------- -------- -------- --------
---------- (1) Diluted earnings per share for the three months ended March 31, 2003, and the six months ended June 30, 2003 reflects the assumed conversion of our $825 million zero coupon convertible senior debentures due 2020, as the conversion in that period would have been dilutive. For the three months ended June 30, 2003 and 2002 and the six months ended June 30, 2002 diluted shares outstanding excludes 7.2 million, 8.1 million and 8.1 million, respectively, potentially dilutive shares issuable upon the conversion of our $825 million zero coupon convertible senior debentures due 2020 because the inclusion of such shares would have been anti-dilutive, given the level of net income for those periods. Net income for the three months ended June 30, 2003 and for the three and six months ended June 30, 2002 also excludes the related add-back of interest expense for these debentures. These shares would have been dilutive and therefore included in the calculation of the weighted average number of shares outstanding-diluted had diluted earnings per share been at or above $.24 and $.23 for the three months ended June 30, 2003 and 2002, respectively, and at or above $.46 for the six months ended June 30, 2002. We redeemed the remaining outstanding principal amount of our $825 million zero coupon convertible senior debentures due 2020 on June 20, 2003. (2) Diluted earnings per share for the three and six months ended June 30, 2003 and 2002 excludes 8.5 million potentially dilutive shares issuable upon the conversion of our $1.381 billion zero coupon convertible senior debentures due 2021 because the inclusion of such shares would have been anti-dilutive, given the level of net income for those quarters. Net income for the three months ended March 31, 2003, and the three and six months ended June 30, 2003 and 2002 also excludes the related add-back of interest expense for these debentures. These shares would have been dilutive and therefore included in the calculation of the weighted average number of shares outstanding-diluted had diluted earnings per share been at or above $.36 and $.35 for the three months ended June 30, 2003 and 2002, respectively, and at or above $.71 and $.69 for the six months ended June 30, 2003 and 2002, respectively. (3) Includes the weighted average number of common shares of Nabors and the weighted average number of exchangeable shares of Nabors Exchangeco (Canada) Inc. (4) Diluted earnings per share for the three and six months ended June 30, 2003 excludes 10.0 million potentially dilutive shares issuable upon the exchange of our $700 million zero coupon exchangeable senior notes due 2023. Such shares are contingently exchangeable under certain circumstances and would only be included in the calculation of the weighted average number of shares outstanding-diluted if any of those criteria were met. Such criteria were not met during the three and six months ended June 30, 2003.