Q1 2021 Nabors Industries Ltd Earnings Call
[music].
Good day and welcome to the Nabors first quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by price Starkey followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask a question and you May Press Star then one. Please note. This event is being recorded.
And I'd like to turn the conference over to William Conroy, Vice President of Investor Relations and corporate development. Please go ahead Sir.
Good afternoon, everyone.
Thank you for joining Nabors first quarter 2021 earnings conference call.
Today, we will follow our customary format with Tony Petrello, Our chairman, President and Chief Executive Officer, and William Restrepo, Our Chief Financial officer, providing their perspectives on the quarter's results along with insights into our markets and how we expect nabors to perform and these markets and support of these remarks, a slide deck.
And is available both as a download within the webcast and and the Investor Relations section of Nabors Dot Com and.
Instructions for the replay of this call are posted on the website as well.
With US today in addition to Tony William and myself are Siggi Meissner President of our global drilling organization and 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 $19 33, and the Securities Exchange Act of 19 and 34.
Such forward looking statements are subject to certain risks and uncertainties as disclosed by Nabors from time to time and 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.
During the call we may discuss certain non-GAAP financial measures such as net debt adjusted operating income adjusted EBITDA and free cash flow.
All references to EBITDA made by either Tony or William 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 and slide.
Likewise, unless the context clearly indicates otherwise references to cash flow mean free cash flow as that non-GAAP measure is defined in our earnings release.
We have posted to the Investor Relations section of our website a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures with that I will turn the call over to Tony to begin.
Good afternoon. Thank you for joining us as we review our results for the first quarter of 2021.
This afternoon I will begin with overview comments, then I'll follow with a discussion of the market and highlights from the quarter William will discuss our financial results I will make some concluding remarks before opening up for your questions.
Our performance and the first quarter exceeded the expectations, which we laid out on our last conference call. We made further progress on our twin priorities of generating free cash flow and reducing net debt.
Our free cash flow was especially noteworthy and the first quarter, we generated $60 million. We accomplished this after funding semiannual cash interest payments on the outstanding notes.
We generated adjusted EBITDA of $108 million.
All our major segments performed well highlighting the earnings power of Nabors portfolio.
We believe this accomplishment will rank favorably compared to the market.
I am pleased with the start to 2021 I am looking forward to reported further progress as the year unfolds.
Now I would like to spend a few moments and the macro environment.
The quarter began with WCS and the high Forty's by.
By early March W. T I exceeded $66.
Price settled back and has been and a tight range around $60.
Global oil supply and demand continued to rebound from the first quarter.
And I, a reported global inventory draw of approximately 185 million barrels during the quarter.
These trends and commodity prices and inventory are supportive of generally increasing oilfield activity across markets.
Comparing the first quarter and fourth quarter averages the Baker Hughes lower 48 land rig count increased by 28%.
According to Inverness from the beginning of the first quarter through the and the lower 48 rig count increased by 116 or approximately 30%.
The growth rate amongst smaller clients outpaced the growth and the larger operators and 39% versus 13%.
Among the larger clients approximately two thirds only modestly increase their operating rig counts were held them flat.
In comparison with our focus on larger and midsized companies and our own average working rig count increased by 21%.
Our total rig count increased by three rigs as we added rigs with multiple customers, while the number of rig stacked on rate declined by six.
Once again, we surveyed the largest lower 48 clients. This group accounts for approximately 40 per cent of the working rig count.
Our review of these clients shows flattish activity planned for the balance of 2021.
Smaller and medium sized operators are responding faster to the recent strength and commodity prices.
And our international markets, we saw the expected demand increase and selected geographies as measured by the number of active rigs.
This trend extends across major markets, and Latin America, and and Saudi Arabia.
In summary, global oil supply and demand continues to approach equilibrium as inventories rationalize.
Commodity prices seem to have stabilized at levels, which generate acceptable operator economics and.
And response drilling activity is increasing.
Having said that virtually every day there is a reported a major outbreak of COVID-19 and some geography. The most recent example is India <unk>.
The stability of our researches COVID-19 remains a drag on confidence and the recovery.
Overall, assuming global economics continue to improve the oilfield market environment is poised to support higher levels of activity.
Yeah.
Now I will comment on our first quarter results.
Total adjusted EBITDA was 108 million and the quarter.
These results reflect the operating performance that was somewhat better than anticipated.
With this performance, we generated approximately $60 million and free cash flow.
Our global rig count for the first quarter increased by eight rigs and we saw growth across all our drilling segments.
And our lower 48 business reported daily rig margin of 8466 was in line with our guidance.
For the international segment adjusted EBITDA for the quarter met our expectations.
Daily margin at 12917 was near the upper end of our guidance range driven by excellent performance and the field.
Once again, we had outstanding operational execution and a high spec rig fleet.
Strong operations are leading safety performance and continued cost control and Capex discipline, all drove the quarter's results.
Next I would like to mention and some specific highlights.
During the first quarter, we completed an additional debt exchange transactions between these and our free cash flow, we logged another quarter of balance sheet improvement.
Adjusted EBITDA and our drilling solutions segment again increased sequentially.
We saw continued growth and the penetration of our smart roll App Smart drill is nabors proprietary rig activity sequencer that digitize workflows and optimizes rig processes, our installations on nabors, lower 48 rigs increased by nearly 25% versus the fourth quarter.
Overall, NDS penetration five or more services nabors, lower 48 rigs increased versus the prior quarter.
And now stands at more than 70%.
A year ago this penetration rate was 60%.
As we are adding rigs and clients increasingly realize the value and NDS services, we see this reflected and nds's results.
Also in Mds client use of our rig cloud platform for digital operations increased and.
And the first quarter highest utilized rig cloud on nearly all of our working rigs and the lower 48.
Our third party installations also grew sequentially.
We continue to rollout, our differentiated rig and cloud analytics platform.
And innovative platform aggregates, a wide spectrum of drilling and well data, including Kpis and Wellbore placement statistics clients.
Clients received this information with customizable dashboards that enable real time decision, making and drive optimal results.
Okay.
We successfully completed the restart of eight idle rigs in Saudi Arabia. This is notable considering the logistical and staffing challenges are starting up a large number of rigs and a compressed timeframe.
And the local team and the Kingdom collaborated closely with our customer to plan. The idling process. This arrangement yielded significant cost benefits, while the rigs are idle and as they were restarted.
We recently published our updated ESG report for 2020, I think you will be impressed with our progress in this area.
On a related note. We now have two rigs running advanced battery based hybrid energy management solutions and the lower 48.
We believe Nabors has the first successful installation on and natural gas fuels rig and the industry. This system has yielded significant fuel savings as well as and improved emissions profile.
Third lower 48 system is expected to deploy and the near future. We are and early discussions with multiple operators for systems and and our international markets as well.
In addition to these highlights I would like to discuss rig cloud analytics and more detail.
As a reminder, the rig cloud value chain combines our edge analytics and digital workflow capabilities.
These create a unique and compelling value proposition during the well construction process.
Rig cloud analytics is powered by high and edge computing at the rig site. This infrastructure enables us to deliver real time analytics that drive database decisions across multiple wells and rigs.
In addition rig cloud analytics offers key differentiators for MTS is digital and automated solutions, such as our smart suite.
With rig cloud analytics clients can explicitly to determine the value generated by our apps and drilling services.
In turn these features should support a faster pace of technology adoption and mutually beneficial performance based contracts.
The initial focus of our rig cloud analytics is the prediction of future outcomes answering the questions what is likely to happen and when.
Our roadmap should lead us beyond this functionality and ultimately facilitate through automation of the drilling process.
And we'll also make some comments on the energy transition and our initiatives to position Nabors as a leader as our industry evolves I mentioned earlier increased deployments of the power management system for rigs and we are also examining several alternatives to improve nabors own carbon footprint and cooling technologies aimed at carbon capture and emissions minimum.
Asian and power management.
We look forward to leveraging our expertise global footprint and proven record of innovation to develop and deploy impactful clean energy solutions, we expect to make tangible progress and the near future and I am.
Cited with the potential of these strategic initiatives.
Before turning the call over to William I will discuss our view of the market and more detail.
The lower 48 industry has he had at 197 rigs or 87% since its slow and August based.
Based on the commodity price backdrop, and our conversations with clients, we expect nabors rig count to increase each quarter through the balance of 2021.
Along with this activity outlook and the resulting increases in utilization, we see pricing traction and the second half of the year.
And our international markets, we continue to see steady increases in activity across our major markets. There are two specific developments, which I would like to draw your attention to.
First the standard joint venture and Saudi Arabia has now received four awards for Newbuild rigs from Saudi Aramco and we expect the first of these to deploy and early 2022.
These new deployments are the first step to scale the operation to a new level backed by the support of our key customer.
We are excited at the beginning of this phase of the relationship with our partner and and future growth opportunity. It presents.
And Latin America, we are seeing the customer base broaden and both Argentina, and Colombia, we have rigs working for three customers and Colombia and five in Argentina, where we hold 38 per cent of the market. We think this diversification is healthy for nabors and indicates the wide appeal of our value proposition across the customer base now.
Now, let me turn the call over to William who will discuss our financial results and guidance.
Thank you Tony and good afternoon, everyone.
The net loss from continuing operations of $141 million.
And the first quarter represented a loss of $20 and <unk> 16 per share.
First quarter results compared to a loss of $112 million or $16 from 46 per share and the fourth quarter of 2020.
The fourth quarter included $162 million of.
Pre tax gains from debt exchanges and repurchases.
Partially offset by charges of $71 million, mainly from asset impairments for a net after tax gain of $52 million or $7 and <unk> 40 per share.
Excluding these unusual items and net loss improved by $23 million, primarily reflecting lower depreciation and interest expense.
Revenue from operations for the first quarter was $461 million.
And our sequential gain of 4%.
Revenue improved and most of our segments driven by increased drilling activity and the markets we serve.
And the lower 48 drilling revenue of $110 million increased by $6 2 million.
Or 6% as our rig count improved by 5%.
Despite some deterioration and the average pricing for our fleet.
Revenue per day increased by $700, reflecting a significant reduction and the number of rigs stacked on rate.
Generally effect on rates rigs returned to work their day rates increase substantially.
Lower 48 average rig count at $56 two was up sequentially by $2 six rigs in line with our expectations.
International drilling revenue.
At $247 million increased by $1 $7 million or 1% and.
Despite the absence of $4 million and early termination revenue from the prior quarter.
Average rig count of $64 eight increased by 2.2 rigs or three 5% matching our expectations for the quarter.
As anticipated eight rigs were reactivated and Saudi Arabia progressively during the first quarter.
However, average rig count and the eastern Hemisphere fail.
Reflecting mostly the contract terminations and we experienced in the fourth quarter.
Canada drilling revenue was $21 million and increase of $6 2 million or 42%.
Rig count increased by four rigs on a seasonal ramp up and activity.
Daily revenue increased by nearly $400.
Nabors drilling solutions revenue was $35 $7 million.
Up $3 7 million or 12%, primarily driven by improved performance software and managed pressure drilling.
Notably there was continued growth of rocket with third parties and further adoption of smart drove by new clients.
Rig technologies revenue of $25 7 million.
Decreased by $1 6 million or 6% due to lower capital equipment sales and fewer rentals.
Although AST and certification and repair activity, where favorable several clients deferred deliveries and new equipment.
Total adjusted EBITDA for the quarter was $108 million in line with the fourth quarter and somewhat ahead of our expectations.
<unk> improved results in Canada and India.
Fed reductions and our other segments.
U S drilling adjusted EBITDA of $58 8 million was down by $3 4 million or five 4% sequentially low.
Lower 48 performance was in line with our expectations.
As we expected daily rig margin came in at $8466 at $1000 impact compared to the fourth quarter.
Quarter on quarter, although rig count increased the additional volume was more than offset by a reduction and the number of rigs working and pre pandemic rates and of rigs stacked on rate.
I would like to point out that margin. So this back on rig rates are generally higher and the fleet average.
For the second quarter, we expect daily rig margins of between 7000, and $7500 driven mainly by the signing of renewals or new contracts at current day rates.
Which are lower than the average per fleet.
We forecast at 6% to seven rig increase for the second quarter or and 11% to 12% sequential improvement.
Our rig count and the lower 48 currently stands at 64 rigs.
Or about 7.8 rigs higher than the average for the first quarter.
Our other markets within the U S drilling segment are expected to improve somewhat as compared to the first quarter, reflecting incremental rig count.
International adjusted EBITDA decreased by $1 90 day to $62 6 million and the first quarter or two 9% sequentially.
The improvement and rig count was more than offset by the absence of early termination revenue that occurred in the fourth quarter.
Daily gross margin for the quarter was $12917 and.
600 dollar reduction as compared to the prior quarter.
The fourth quarter included approximately $700 per day in early termination revenue.
Turning to the second quarter, we expect an international and rig count increase of three to four rigs or 5% to 6%.
Driven by units and returned to work and Latin America, and Saudi Arabia over the course of the prior quarter.
We expect gross margin per day of approximately 12005 hundred reflecting a long rig moving Mexico and general strikes and Argentina.
These trials could result in a period on standby rates for some other things.
Current rig count and the international segment and 69 rigs.
Which translates into a six 5% increase over the average of the first quarter.
We believe that activity and the international markets, where we operate already inflated and the fourth quarter of last year.
Canada, adjusted EBITDA of $9 $7 million increased by $6 2 million.
Rig counts and $13 seven rigs was for higher sequentially.
Gross margin per day of 8160, <unk> also increased due to the higher activity level and the receipt of $3 $5 million and governmental wage subsidies and.
And the second quarter, we expect the effects of the seasonal spring breakup to impact results.
And with average rig count around six rigs and daily margins between 5000 and $506000.
We currently have six rigs operating in Canada.
Drilling solutions adjusted EBITDA of $11 $5 million was up $1 2 million and the first quarter or 12% on the strong performance drilling and managed pressure drilling revenue.
We expect adjusted EBITDA and the second quarter to be in line with the first quarter.
Rig technologies reported negative adjusted EBITDA of $500000 and the first quarter.
A decrease of roughly $1 million.
For the second quarter the segment should once again delivered positive EBITDA and improved capital equipment sales.
Now before I turn to our liquidity and cash generation, let me remind you that the mandatory convertible preferred shares.
We'll be converting next Monday may 3rd Approx.
Approximately 668000 common shares will be issued and a final dividend will be paid and the conversion.
And the first quarter free cash flow totaled $60 million.
This compares to free cash flow of approximately $66 million and the fourth quarter.
I would like to point out and in the first quarter of 2020, we.
We delivered $8 million and free cash flow.
Our EBITDA and that quarter was almost twice the EBITDA of the first quarter of 2021.
This improvement and cash flow conversion as compared to a year ago reflects sustained effort and cost and capital discipline and will continue over the years to come.
As in the past the first quarter was marked by the semi annual interest payments and a senior nodes of over $70 million.
And by approximately $25 million and several annual payments that we incurred at the beginning of the year.
These payments, which will not recur during the remainder of the year and good property and other taxes as well as employee incentive bonuses.
These outflows were offset by strong customer collections and the first quarter and.
Including some catch up from last year and.
And as well as by lower Capex and higher asset sales our.
Our capital expenditures of $40 million and the first quarter included seven and a half million and payments related to set and add new builds.
To date, we have been awarded four rigs by Saudi Aramco.
During the second quarter, we expect to incur $80 million and Capex of one.
30 million will be paid by standard for the Newbuild program.
Our target remains at $200 million for the full year 2021, excluding income and notebooks force on it.
For this year net total payments by Samit for the new builds will depend on the achievement of construction milestones by the local manufacturer.
Although the local rig program has been delayed by multiple years.
Saudi Aramco has now demonstrated its commitment to send that rig building program.
Given the recent awards and additional rig purchase orders by Senate.
We now expect <unk> total payments for these no rigs to approach $100 million for this year, assuming milestones are met.
And January standard distributor and a combined $100 million of the excess cash of that accumulated to its partners.
Half of that amount was paid to our nabors subsidiary and the other half to Saudi Aramco.
And our consolidated basis, the payment to Saudi Aramco, partially offset the free cash flow generation.
As a result, the net debt reduction for the quarter was limited to $6 million.
Nonetheless, with incentive distribution to nabors and other cash we generated we continued to reduce our total debt during.
During the quarter, we retired approximately $40 million and senior notes, including convertibles, which resulted in a 30 made a reduction and our total debt as reported.
We also reduced the amount outstanding on our revolving credit facility by an additional $40 million.
Our total debt reduction for the quarter was $70 million.
At the end of the first quarter the amount drawn on our credit facility was $633 million.
And our cash balances stood at $418 million.
For the second quarter, we are targeting approximately $50 million and free cash flow.
Although our interest payments will decrease sharply in Q2, we anticipate a reduction and our customer collections.
Higher capex and lower asset sales as compared to the prior quarter.
We will continue to focus on delivering industry, leading drilling performance to our customers and.
And sustained growth and market penetration and our drilling solutions business.
While continuing to push for cost and capital discipline.
We believe that successful implementation of these goals will support her exceptional free cash flow generation.
We will continue to allocate our future cash flow to debt reduction until we reach our leverage targets.
With that I will turn the call back to Tony for his concluding remarks.
Thank you William I will now conclude my remarks this afternoon with the following.
As we review the first quarter results I cannot lose sight of the fact that it was just a year ago that we began to understand the full impact of the COVID-19 virus the.
And the effects of a global pandemic with far reaching I think it is fair to say that virtually every aspect of our lives and this impacted the.
The same is true for our company as we adapted to the demands of the pandemic environment, we were forced to examine all of our business processes policies and procedures.
And the beginning of the second year of this pandemic era reinforces our concentration on several priorities first we maintain our laser focus on safety over.
Over the past year, we continued to improve our work processes and procedures what.
And what does it become more evident is palpable and change and our underlying safety culture for the better for this reason and I now believe that mission zero. Our goal of zero safety incidents is closer to reality and at any time since we introduced it.
Second our commitment to operational excellence continues clients value and compensate for performance.
Our industry, leading rig level economic results stemmed from a multi year company wide effort and extending nabors position as the global performance Driller of choice and we're not finished yet.
Which brings me to the third priority Nabors remains dedicated to extending its position as the drilling industries technology leader Nabors.
Nabors has been and innovation engine for decades. It has become clear that our industry must now transform itself looking ahead, our advanced solutions will enhance performance and efficiency as well as sustainability, we believe our investments and robotics and automation and technology will catapult.
Us to a new level of performance.
I hope you sense, my enthusiasm and genuine excitement for our future I look forward to reporting on our progress that concludes my remarks. This afternoon. Thank you for your time and attention with that we will take your questions.
And we will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble the roster.
And our first question today will come from Karl Blunden with Goldman Sachs. Please go ahead.
Thanks, Good afternoon, and thanks for the time, you keep making progress on paying.
Paying down some of your maturities both from the bank side and the bond side.
Curious your thoughts on what the next steps would be here you have some maturities coming due and little bit later, this year, but and that's more in 'twenty, three and 'twenty, four and and the liquidity levers that you see as most feasible to address this.
And we know.
So at this point, what we have left this year amounts to fairly manageable amount.
So nothing particular needs to be done for that and then the next maturities coming in 2023. So at this point I don't think it makes sense to telegraph anything or start them.
And we have many options and as the market develops over the coming year, we will decide what we do about those maturities.
Okay that makes sense and and certainly our.
Nearly guaranteed bonds are trading at levels that.
And my relatively tight now with regard to other ways to raise capital and.
And maybe address some of this already but some companies and the industry with a strong equity rally and spoken about equity linked issuance and that's something that you would consider as well and in the range of options.
We consider everything all the time, but again like I said, we're not going to be telegraphing at.
What we will do and the future because I mean, we have many options. So I don't think it makes sense to focus on anything and and and talk about it at this point.
Okay fantastic thanks very much.
And our next question will come from Taylor Zucker with Tudor Pickering Holt. Please go ahead.
Hey, good afternoon, and and thank you and my first questions and international the and.
Margin guidance for 12000, and $500 a day it sounds like that.
Some are negative impact from a rig moving and Mexico and then also have some negative impact from <unk>.
Argentina strike event.
And I was hoping you could help us think about the magnitude of the negative impact from for both those points and.
You know maybe give us some some guidance or or just high level commentary on and where you see the margin trending once once you get past Q2 and into the back half of the year.
Okay. So youre right that the guidance was 25, and we expect to check and <unk>.
Guidance to be impacted by a long move and Mexico, and the strikes and Argentina I think we've indicated that we expect the rig count to grind higher and higher throughout the course of the year and those incremental rigs will be accretive to the overall fleet I think the issue about margin, though is as those rig rollout there will be startup cost ramp up costs that we'll have to.
Two.
Also bear so on net basis.
And we'll see what happens, but we're not going to give any specific numbers for the rest of the year on our margins beyond the second quarter right now so all I'll add to what Tony said I mean, the pricing right now.
Fairly stable to up.
And the international markets.
Curation and this coming quarter is solely resulting from the rig move and Mexico, and it's really the health.
Health employees, and Argentina that are striking and their cover and they're basically blocking the roads and the access into their into the well site. So that's what going on in Argentina, and they're asking for higher salary increases and theyre sort of arguing with the government and what that should be so we expect a and the government to sort that out pretty quickly.
Nonetheless decided to put some preventive.
Contingency for for for those potential standby rates.
Okay, that's helpful and and from an international activity perspective, and the backdrop just it just feels like it has to be improving right now your rig counts trending higher and so I'm curious what what sort of visibility you have towards incremental rig additions and I, both Latin America, and the middle East and and maybe even elsewhere and.
The back half of the year are those things that you do have visibility on today or is it just a bit too early to make that comment today.
Well as I said I think we do see visibility to say say enough right now that we think the rig count is going to grind higher during the course of the year I think as William alluded to we thought through and fucked employee occurred last quarter.
And I think and in the fourth and the book in the fourth quarter, rather and the fourth quarter and therefore, we do believe that's the case and that that will be in the middle East and in Latin America, but I'm not going to get into specific countries right now.
Okay Fair enough that's it from me.
And our next question will come from across Fred with the ATB capital markets. Please go ahead.
Thank you and just following up on the last question on International. So you know some of the largest GAAP service companies are saying that second half.
The revenues and international would be optimal.
Our upstream capital spending could be up like.
Low double digits, maybe 12 or 13% year over year. So what's your.
Rig count and international kind of admitted that that means second half international rig count from Nabors could be like you know 12, 13% or something and that range up second half of last year that would imply maybe 70 570 576 rigs and.
Average and they used to.
Is that the right way to think about it.
What kind of I think you.
And you shouldn't.
And you shouldn't extrapolate what the big companies and I remember we were indifferent, we're not we're not and all the markets internationally, and we're certainly not and offshore.
Internationally. So so I don't think those percentages are applicable to our fleet, but we're pretty confident given the clients that we do have.
Some of the negotiations ongoing and some of the tenders that we feel we're very well positioned for that you will see a very nice progression and the second half.
Of 2021.
Okay.
Thank you.
And secondly, your margin guidance for Canada does that include a wage subsidies.
No.
It does not okay.
And and then second and then finally just don't we.
And we don't expect the number as big as that and the.
And second quarter, so and.
What we had and the firm.
Right and.
And then in terms of U S. Net low 48 drilling margins do you think that second quarter is the bottom.
No.
I do not think so.
Think of today and the market.
And what car we are looking at Oh.
And average out.
Current margins.
And on a marginal basis incremental basis and somewhere.
And the $6000 range and Thats, where the new contracts are being signed.
Lee.
It's a range of course, but that's the average.
So we do believe as Tony mentioned and.
And I think Tony can elaborate a little bit on that that pricing will evolve and the second half. So we'll go up from that but it's a question and how many rigs we add and how fast and so this.
And depending on how well, we do with rig additions.
And it's good and general, but it does bring the margin slightly down and we don't think we will.
And we're hoping to hold the line at 7000, and that's what we're holding where.
Where we think we will bottom.
Yeah, just to add some more color there. So I think the good news is we are seeing some slight movement and leading edge pricing.
Particularly west, Texas and East, Texas.
Both of those I think as the as the high spec rig gained utilization there it's much more constructive pricing environment, I think south, Texas, North Dakota, and and the northeast are lagging there a little bit but.
In terms of price and leading edge pricing continues to be below our current average of the fleet. However.
I think from even last quarter, and where we're not seeing leading edge rates and the high teens and maybe crossing over into some low twenties.
It is constructive and the question is as <unk>.
As utilization driving forward and the second half and price increases will that offset the.
The declines that you see in terms of the delta between the historical backlog of rigs versus the spot price and as William says, we are hoping to balance that to have some good results going into second half.
And it makes sense that you got.
Have a handy that you schedule for contract explorations.
Going forward in the coming quarters.
And for the lower 48 rigs.
No I think I don't really Havent handy, so maybe maybe if you could follow up with a bill.
Yeah.
I can do that thanks, Sir thank you very much.
And once again and if you'd like to ask a question. Please press Star then one.
Our next question will come from Gregg Brody with Bank of America. Please go ahead.
Yes.
And good afternoon guys.
Hello, Greg.
And just.
Maybe could you clarify a bit and found that so you said there is four rigs that are on order now and.
And I think you said, there's $100 million of Capex.
And now let me let me clarify.
Aramco has awarded four rigs we have not yet.
Issued deals for all of those rigs.
Only for some of them zone.
And so so we havent ordered but but yes, I mean, we expect that we will order those four rig sometime this year.
Got it so how much capex at sign out should we expect this year.
And I'm trying to separate what's what's the total capex for the company.
And then just figure out what's the time line.
And I think we can we can we can talk about that.
And in another venue I don't have the specifics and we look at Saudi Arabia, together, but what I can tell you is for the in Kingdom rigs.
Pending Coors and the milestones and achieve the milestones by a local manufacturer which is.
Yeah.
Part of the assumption of the number that I gave earlier, we should approach somewhere in the range of $100 million. This year paid by Sun and for those new builds.
The rest is the rest of our Capex spending is.
As in line with where we've guided before at the end of the year and and we still expect that the number will be.
For the rig.
And you.
Am I correct with that $2 55 that was the that was the guidance right.
No the guidance too.
200, or 200 million for the full year.
Thanks, and some number approaching 100, depending on milestones being achieved by the by the local manufacturer paid based on it.
So you're saying 200 million plus whatever it is between two and 350 capex.
Got it alright.
And then you made a comment about exceptional free cash flow this year and help us think through what's driving that.
What we should expect from working capital harvesting.
And are you are you comfortable actually giving what that exceptional free cash flow number is.
And I think I think and this is not just from a.
Working capital working capital did well and the first quarter, we had maybe a few tenths of millions extra from the delays we suffered at the end of last year. We had a couple of customers that sat on their invoices large ones. So that had an impact and the fourth quarter of last year.
But a lot of what youre seeing today and.
Nabors is driven by.
Reductions in overheads cuts and Capex.
And interest rates of course have been going down and so all those items are much more impactful that perceived or.
Working capital.
<unk> as you said, that's not a big component of our free cash flow.
Got it and one more one last one for you So you mentioned and <unk>.
And on an on participating in the carbon intensity of the energy transition with splits investments you mentioned a few of them could you talk a little bit about how should we think about the timing of the of those investments from your side and when you see that becoming part of your business.
Yeah, well I think some from some other things are internally developed from our normal course operations and as I said the power management, we're rolling out right now and we have some follow on activities and next couple of quarters Youre going to see some follow on products that are add ons.
I don't see that as a big capital expenditure consumer, though if thats and Thats, what youre getting at.
So yeah, I mean, that's part of it I'm, just trying to understand and what it.
And what's the business can be up to as much investment required.
Yes.
Well like I said, what we're what we're targeting and things that actually have scale capability that is our goal.
And the only probably the nabors rigs could apply more generally as well. So that's the kind of thing we're looking at and next couple of quarters I think you'll begin to see what some of those products what will look like.
Alright, well I appreciate the time guys. Thank you.
Yeah.
And once again, if you'd like to ask a question. Please press Star then one.
Yeah.
And this will conclude our question and answer session I would like to turn the conference back over to Bill Conroy for any closing remarks. Thank.
Thank you Paul we'll wrap the call up there. Thank you ladies and gentlemen for joining US. This afternoon. If you have any questions. Please give us a call or E Mail us.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Okay.
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