NBR
#Well, as indicated in the remarks, in the fourth quarter we see a 5% to 10% reduction in EBITDA.
Looking at the first quarter next year, we think looking forward to relative stability.
And I think there is a prospect, as we said before, that most of our, almost all our rate relief cases expire at the end of the year and we'll be trying to recapture a bunch of those at the beginning of the year.
So I think the way we see it right now.
<UNK>, by the way, we have recovered in a couple of places, Mexico and partially in Argentina, as well.
So there is some foundation for optimism there, because some clients have been willing to give back those price discounts.
Sure.
I'm not going to discuss specific rates on this call.
What I can tell you is that we're seeing pricing move up, especially for our higher performance rigs.
There's still a lot of variability in contract terms, so rates you hear are not necessarily comparable, even for rigs that are same class.
But I want to be clear, rates are moving up.
And in fact, in our case, I would say what's really going on is as contracts expire, we're starting to see, we're on a path to convergence of our average day rate in our portfolio to the spot market.
We're not there yet, but we're on that path.
I think the feedback we're getting from customers is the [fear] of the new neighbors.
I think they see our commitment to technology and our commitment to execution and performance.
And I think these are some themes that we'll bring up at the analyst day.
And I think there's been a lot of talk in the past couple years about rigs and what good rigs are, what they aren't.
But the fact is just look at our utilization on the X rigs today, and we'll go into what really pad optimal really means.
But I think what you're seeing is the sign post that says people are really resonating now our message on what really the rig has to have, in terms of components.
And I think people are also resonating with our commitment to performance.
We have a huge internal commitment about the KPIs and beat our own performance, et cetera.
And I think that last call, I announced we have some record scores.
Of course, every contractor always has records on a well-off basis, but this is now part of our culture.
And I think the contractors are starting to favorably, the operators are starting to favorably react to it.
Sure.
I think I talked about this on the last call, as well.
I think during this downturn, we made some special steps to address labor to make sure we retained the best people in our labor force.
The interesting thing about this downturn is, because it was so deep, it actually cut into people that are really committed to the sector, as opposed to people at the margin.
And so there's still a bunch of those people on the sidelines, and we've been able to handle the upturn very well from just our own former hires out of the bench, and that's not exhausted.
So we don't see really a problem in the medium term here adding people.
And we also are embarked on a bunch of training issues with the concept of new rigs and new technology, you have to really adapt to that.
So we're making a commitment to really train these people up, so when they hit the ground running earlier than prior in downturns, which I think the operators are more responsive to, as well.
So all in all, of course, as the duration lasts longer, the likelihood of people returning dissipates.
But right now, I think we're handling it pretty well.
Well, I think the 100 builds that we're talking about is actually enhancing what we have today.
Obviously, we can dial that back if we see things reversing very quickly.
The cost of that is not going to be really very enormous at all.
A lot of the rigs are zero, because some of them well equipped already with all the stuff that they need.
Others are at $1 million up to maybe $3 million, with an average of $2 million.
So the overall number is not really that substantial to us.
In terms of new builds, I think new builds will depend on where the market does play out.
We're not drilling down on a brand-new, new build program on top of the 100 yet, and we'll adjust those as events develop.
Sure.
I think we're smack in the middle of our CapEx process, our budget process right now.
So take this number as a very preliminary, but we are thinking of keeping the CapEx around the $0.5 billion mark next year.
Good morning
I think it's really a prospect of increased utilization in the marketplace.
So that specific contract for these upgrades, because we think that they will make the rigs the best-in-class in the marketplace.
Going back to my question with <UNK>, I think the PACE-X, a PACE-X rig is a walking rig day one.
It has high pressure pumping.
It has four engines.
It's wired for four engines to just drop the third engine in.
It's capable of free mud pumps.
All that stuff is in there.
So it's not a big stretch to round it out.
And so similarly, we have other rigs, as well, non-X rigs that we can get that upgrade at pretty reasonable cost.
So assuming the market cooperates and we see the trend continuing, we'll do that in the a new ordinary course over the next six months without necessarily marking it to a specific contract.
Obviously, if we don't start maintaining utilization of the fleet, we'll slow it down.
But right now, our plan is to do that and then deliver a page over the next six months.
That's always the trick in the sector.
As you know, when you get to around 70% to 80% of utilization, that's when the hockey stick starts working on a pricing basis.
And that's a ways off yet.
But I think for us, the key is to get these in at competitive rates, prove up the value proposition to the customer, and then we have hot rigs in the market and we'll maximize our position.
And I don't think for us it's a big bet and we have and installed base of rigs that will be the premium 100 pad optimal rigs in the marketplace.
There's absolute conviction on that.
And as I said before, the customer's reaction is such that I think that's endorsing it right now.
So getting those rigs to be used, assuming there's no backtracking of the market overall dynamics right now, I'm very confident we're going to get those in the marketplace.
Okay.
What I would say is that the tendering activity is robust.
And so we indicated a couple of dozen in the Saudi arena, but it is more widespread than that.
It applies to Middle East generally, Kuwait, Oman, UAE, for example, and [north of] North Africa and Eurasia.
And overall, I would say number of Africa tenders is actually a multiple of what I just said in (inaudible) Saudi.
In other words, it could be more than 50 active tenders in the marketplace.
So it's a pretty robust marketplace right now.
I'll ask <UNK> if you have anything to add.
No.
You hit it perfect, <UNK>.
So it's a variety.
First of all, I think the Saudi rigs, for example, largely are going to be high demand, high spec rate.
<UNK>, they're all bigger rigs than what you see in the US.
There could be an opportunity to take some existing rigs from the US in certain, there's a minor portion of that could be rigs that could be relocated out of the US, 1500 horsepowers.
But that would be a minor portion of those rigs.
Most of them are deep gas, high spec rigs.
[No.
]
That was <UNK>.
(Laughter) Was that succinct enough.
So with the contracts we have in hand, the current market and customer preferences, we think our Lower 48 margin bottom at around $5,000.
And as I said, I think we are on the move to convergence.
Our rig count, last quarter our average was about 50.
I think we have visibility right now to almost about a 20% to 25% increase in average rig count.
And so with those two numbers, I think basically we think results will, in the fourth quarter will be about the same as the third quarter in terms of EBITDA.
In other words, the increased utilization that we have visibility on right now, combined with where we're at, we think might put us around the same for the third quarter.
And then as we go into the first quarter, obviously, then that utilization really kicks in.
And I think at the end of the fourth quarter, I think we'll be up even more than that average number I just talked about for the fourth quarter.
I think ours will actually be even higher.
So as we go into the first quarter of next year, I think then we'll start to see that improvement.
I'm not going to go into that in detail on this call.
I will say that some service on nearly every working rig of the five or six services we have.
And on some rigs, we're running two or more, about on 70% of the rigs.
And obviously, we're in the start-up phase and that's why you're not seeing visibility on the numbers yet.
But we think we have a plan that we'll be talking about at some point to explain what that penetration levels are and what the economics would be.
So you'll see more of that on the analyst day.
In the third quarter.
Smaller number than that in the fourth, yes.
Usually, yes, but not to that level, not close to that $12 million level.
I didn't say about, I said at least.
That's the way we're thinking about it, anyway.
So everyone's just giving me a look.
But yes, that's the way we're thinking about it.
Yes.
Hang on one second here.
Right.
So yes, as I said before, I think the amounts vary by rig.
Some rigs, it's marginal, some rigs, it's $1 million.
And it depends on certain rigs could be as much as $3 million.
So on average, I think we're talking about on the order of magnitude of $100 million, $125 million.
Some of that will be incurred this year and the balance next year.
So it's relatively modest.
So first all, for utilization percentage right now is 86% on those premium crest rigs that you mentioned.
That's where we are.
Number two, I think yes, we always have an issue of allocating capital between, what we try to do is allocate to the best opportunities, but also try to measure where those opportunities can be over the next couple of years.
So we don't just totally swing it to one market versus the other.
So we do have, we try to choose the best opportunities in international, as well as Lower 48, as we address them.
So the bottom line is, I think we will be keen to pursue some of these international opportunities, and the CapEx number that <UNK> gave you is a number that could be revisited if we were wildly successful there, but we would be prepared to that with international.
On the US side, as I said, until we see the day rates in the lower 20s with at least operational entity of some long enough term to make it make sense, we don't see gearing up for new rigs on a big new build program in the US right now.
Just to expand on what <UNK> said, and the M rigs and the X rigs are basically all gone.
We can't market anymore.
We're done.
They're done through year-end, basically
Right.
I think as I just said, if the rates get into the low 20s, then that dynamic that you just referred to becomes actionable, and that's what we will do.
I'm not going to go there.
No way.
I think the equity is wherever we are on the bankruptcy court and we're just following, we're a participant in the process right now.
So the fate of the equity is still an issue that's open with the bankruptcy court.
Obviously, the lenders have put forth a confirmation plan which does provide something to the equity, which is not really substantial.
The market has changed and we'll see what happens in the bankruptcy court.
That's all I'm saying.
I think we can assume is I'm always looking out for the interests of Nabors shareholders, whatever that's going to be.
Operator, we're about five minutes from one hour, so we'll take one more question, please.
Thank you, <UNK>.
Around 30%.
I think when you look at a technology curve in general, you always see there's the right end of the curve, which is called the laggards, which is like that 15%.
So I think there's always going to be that part of the market that doesn't come along, which will be relegated to the smaller E&P companies or private companies with smaller legacy rig guys.
That's the guys that are going to be hanging out in that arena.
I think that honestly, their economics be under pressure, but they just don't die, they kind of just drift along.
So I do see that kind of bifurcation existing, yes.
No.
I mean, pricing is always supply and demand.
And the notion that there's an oligopoly or something that's going to really affect pricing, I don't think is helpful.
I don't believe it.
And they're happy.
Because I always have confidence in the operator's ability or the customer's ability to create new opportunities or the market to create new supply, just like on the oil price.
So I'm not going to sit here and make that argument.
What I can say is I think relative to everybody else, I think what we've been working on is to make sure our relative position is as strong as possible, which is why we're really investing in the rig technology and the rig platform.
And the performance issues I spoke about earlier, that's our strategy to deal with that.
And we think what we've got to do is improve the value proposition to the customer to get a greater share of that pocketbook.
And that's what we're working on.
The other thing, if it happens, that's just a bonus.
For those that believe that, that's just a bonus.
But that's not part of my strategy here.
I'll let <UNK> answer.
Those rigs are going back on older projects.
The combined knowledge, some of the new bids that are going on have not been awarded yet.
So there's nothing new going on yet.
And that will wrap up our call.
Thank everybody for participating, and if you would close it out for us, Dan.
