Q3 2024 Nabors Industries Ltd Earnings Call
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Speaker Change: Good day and welcome to the third quarter 2024, Abrus Industries earnings Conference call, all participants will be in listen only mode.
Operator: Good day and welcome to the 3rd quarter, 2024, Nabors Industries earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: So do you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded.
Speaker Change: After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.
William Conroy: I would now like to turn the conference over to William Conroy, Vice President of Corporate Development and Investor Relations. Please go ahead.
Speaker Change: I would now like to turn the conference over to William Conroy, Vice President of corporate development and Investor Relations. Please go ahead.
Speaker Change: Good morning, everyone. Thank.
William Conroy: Good morning, everyone. Thank you for joining neighbors, 3rd quarter, 2024, 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 neighbors 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 neighbors.com. Instructions for the replay of this call are posted on the website as well.
Thank you for joining Nabors third quarter 2024 earnings conference call.
Speaker Change: 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 in these markets.
Speaker Change: 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 Dot com.
Speaker Change: Instructions for the replay of this call are posted on the website as well.
William Conroy: With us today, in addition to Tony, William, and me, are our other members of the senior management team.
Speaker Change: With US today in addition to Tony William N me or other members of the senior management team.
William Conroy: 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 neighbors 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.
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.
Speaker Change: Such forward looking statements are subject to certain risks and uncertainties as disclosed by Nabors from time to time in our filings with the Securities and Exchange Commission.
Speaker Change: As a result of these factors our actual results may vary materially from those indicated or implied by such forward looking statements.
William Conroy: 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 evit-da made by either Tony or William during their presentations, whether qualified by the word adjusted or otherwise, mean adjusted evit-da, as that term is defined in our website and in our earnings release. Likewise, unless the context clearly indicates otherwise, references to cash flow mean adjusted free cash flow, as that non-GAAP measure is defined in our earnings release. We have posted to the investor relations section of our website a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures.
Speaker Change: 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.
Speaker Change: All references to EBITDA made by either Tony or William during their presentations, whether qualified by the word adjusted or otherwise.
Speaker Change: Adjusted EBITDA as that term is defined in our website and in our earnings release.
Speaker Change: Likewise, unless the context, clearly indicates otherwise references to cash flow mean, adjusted free cash flow.
Speaker Change: That non-GAAP measure is defined in our earnings release.
Speaker Change: 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.
William Conroy: The presentation accompanying today's discussion includes important disclosures that apply to this call. Please also note, this call does not constitute an offer to sell or buy, or the solicitation of any offer to buy or sell any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful, prior to registration or qualification under the securities law of any such jurisdiction. No offering of securities shall be made except by means of prospectus, meeting the requirements of Section 10 of the Securities Act of 1933. In connection with the proposed transaction, Nabors and Parker intend to file a registration statement on Form S-4 with the SEC, which will include a joint proxy statement and a prospectus.
Speaker Change: The presentation accompanying today's discussion includes important disclosures that apply to this call. Please.
Speaker Change: Please also note this call does not constitute an offer to sell or buy or the solicitation of any offer to buy or sell any securities nor shall there be any sale of securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to.
Ration or qualification under the securities laws of any such jurisdiction.
Speaker Change: No offering of securities shall be made except by means of prospectus meeting the requirements of section 10 of the Securities Act of 1933.
Speaker Change: In connection with the proposed transaction Nabors and Parker intend to file a registration statement on form S. Four with the SEC, which will include a joint proxy statement and prospectus.
William Conroy: Nabors and Parker will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decisions, investors and security holders of Nabors and Parker are urged to carefully read the entire registration statement and joint proxy statement and prospectus when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction.
Speaker Change: Nabors and Parker will file other documents regarding the proposed transaction with the SEC.
Before making any voting or investment decision investors and security holders of Nabors and Parker are urged to carefully read the entire registration statement and joint proxy statement and prospectus when they become available.
As well as any amendments or supplements to these documents because they will contain important information about the proposed transaction.
Anthony Petrello: With that, I will turn the call over to Tony to begin. Good morning. Thank you for joining us today.
Speaker Change: With that I will turn the call over to Tony to begin.
Tony: Good morning, Thank you for joining us today.
Anthony Petrello: Before I comment on Nabors results in the outlook, I would like to make a few comments about the acquisition of Parker World War. I have stated that we are excited about the combination of our companies. Parker's portfolio of businesses and geographic footprint fit neatly into Nabors. We believe the acquisition accelerates our strategy, particularly in our drilling solution segment. We see excellent growth prospects of Parker, especially for quail tools. And in economic terms, we think this deal will benefit all Nabors shareholders, including Parker's current owners, as the market recognizes the transaction's value and merits.
Tony: Before I comment on Nabors results and the outlook I would like to make a few comments about the acquisition of Parker Wellbore.
Tony: I have stated that we are excited about the combination of our companies.
Tony: Parker's portfolio of businesses and geographic footprint fit neatly its neighbours, we believe the acquisition accelerates our strategy, particularly in our drilling solutions segment we.
Tony: We see excellent growth prospects of Parker, especially for quail tools.
Tony: And in economic terms, we think this deal will benefit all nabors shareholders, including Parker's current owners as the market recognizes the transactions value and merits.
Anthony Petrello: Now, I will discuss our results to an outlook. Adjusted EBITDA in the third quarter totaled $222 million. This was in line with our expectations. Margin in our international segment exceeded the $17,000 mark. Daily margins in the US lower 48 remained above the $15,000 mark. Adjusted EBITDA in our drilling solution segment increased sequentially by 5.7%. This performance was driven primarily by growth in our international business and a positive mix shift in the US.
Tony: Now I will discuss our results and outlook.
Tony: Adjusted EBITDA in the third quarter totaled $222 million. This was in line with our expectations.
Tony: Margin in our international segment exceeded the 70000 dollar Mark daily margins in the U S. Lower 48 remains above the $50000 Mark.
Tony: Adjusted EBITDA in our drilling solutions segment increased sequentially by five 7%.
Tony: This performance was driven primarily by growth in our international business and a positive mix shift in the U S.
Anthony Petrello: I will begin my detailed remarks with comments on the international markets. For Nabors, the international markets remain a source of strong growth. Our prior rewards are progressing into deployments and incremental EBITDA. I know that we have three more international rigs expected to start by the end of 2024. We also have a considerable number of pending in deployments in 2025 and beyond, which I will detail shortly. And the prospect for additional tenders and awards is robust. This provides the opportunity for us to be selective. We will only pursue the most attractive incremental projects.
Tony: I will begin my detailed remarks with comments on the international market.
Tony: For Nabors International markets remain a source of strong growth.
Tony: Our prior rig awards are progressing into deployment and incremental EBITDA.
Tony: I know that we have three more international rigs expected to start by the end of 2024.
Tony: We also have a considerable number of pending in deployment in 2025, and beyond which I will detail shortly.
Tony: And the prospect for additional tenders and awards is robust.
Tony: This provides the opportunity for us to be selective we will only pursue the most attractive incremental projects.
Anthony Petrello: Turning to the US market, I am pleased with our resilience in pricing and rig count. End to end, lower 48 industry activity increased by six rigs over the course of the third quarter. The average lower 48 industry rig count decreased by approximately 3% sequentially. In this lower 48 industry environment, leading edge pricing for high performance rigs remained stable. This market supports our daily rig margins at a historically attractive level. Our global average recount was essentially in line with the previous quarter at 159. Our average international recount increased slightly, while the U.S. Recount declined modestly.
Tony: Turning to the U S market I am pleased with our resilience in pricing and rig count.
Tony: And to earn lower 48 industry activity increased by six rigs over the course of the third quarter.
Speaker Change: The average lower 48 industry rig count decreased by approximately 3% sequentially.
And this lower 48 industry environment, leading edge pricing for high performance rigs remained stable. This market supports our daily rig margins at historically attractive levels.
Speaker Change: Our global average rig count was essentially in line with the previous quarter at 159.
Speaker Change: Our average international rig count increased slightly while the U S rig count declined modestly.
Anthony Petrello: Nabors drilling solutions and rig technologies segments generated combined EBITDA of more than 40 million. Together, their total EBITDA increased from the previous quarter.
Speaker Change: Nabors drilling solutions and rig technologies segment generated a combined EBITDA of more than $40 million.
Speaker Change: Together their total EBITDA increased from the previous quarter.
You may now increasing the proportion of the Capex light segment is an important component of our strategy in fact as a portion of the company's consolidated EBITDA their contribution increased to 18, 3%.
Anthony Petrello: As you know, the CAPEX light segments is an important component of our strategy. In fact, as a portion of the company's consolidated EBITDA, their contribution increased to 18.3%.
Anthony Petrello: Next, I will make some comments on the five key drivers of our results. I'll start with our international drilling business. The international drilling market continues to show broad strength. We see this across most of our important geographies, and in some where we are not currently active. We are encouraged by the substantial number of pending opportunities for additional rigs. In this market, we will choose carefully, pursuing only the most attractive prospects, namely those that enable us to generate high returns and meet our free cash flow objectives.
Speaker Change: Next I will make some comments on the five key drivers of our results.
Speaker Change: I'll start with our international drilling business.
Speaker Change: The international drilling market continues to show broad strength, we see this across most of our important geographies and some where we are not currently active we are encouraged by the substantial number of pending opportunities for additional rigs.
Speaker Change: In this market, we will choose carefully pursuing only the most attractive prospects, namely those that enable us to generate high returns and meet our free cash flow objectives.
Anthony Petrello: Next, I'll recap the developments in our international business. In the third quarter, we deployed the last of our four-week award in Algeria. These deployments were accomplished in a capo-efficient manner by re-activating four of our idol rigs in the country. We have another four idol rigs in Algeria. We are optimistic to activate a number of those in the near term. During the fourth quarter, we also expect to commence operations with two of the three previous rig awards in Argentina. Similar to Algeria, we are putting idol rigs to work. In the case of Argentina, the rigs are coming from the US.
Speaker Change: Next I'll recap the developments in our international business.
Speaker Change: In the third quarter, we deployed the last of our four Big Award in Algeria. These.
Speaker Change: These deployments were accomplished in a capital efficient manner by reactivating four of our idle rigs in the country.
Speaker Change: We have another four idle rigs in Algeria, we are optimistic to activate a number of those in the near term.
Speaker Change: During the fourth quarter, we also expect to commence operations with two of the three previous week awards in Argentina.
Speaker Change: So Algeria, where putting idle rigs to work in the case of Argentina. The rigs are coming from the U S. The third rig should start in early 2025. In addition, we expect substantial drilling solutions content on all of the rigs.
Anthony Petrello: The third rig should start in early 2025. In addition, we expect substantial drilling solutions content on all of the rigs.
Anthony Petrello: In Kuwait, we have started upgrading the rigs for the three awards we announced earlier. Each of those rigs is currently in Country. All three are on a schedule to deploy in early 2025.
Speaker Change: In Kuwait, we have started upgrading the rigs for the three awards, we announced earlier each of those rigs is currently in country. All three are on are scheduled to deploy in early 2025.
Anthony Petrello: In Saudi Arabia, we have a number of items to update. First, I am sure you have seen reports of rig suspensions in the kingdom. That is, our joint venture with Saudi Aramco has received notice to suspend operation of three rigs at a 51. Two of those suspensions began early in the fourth quarter. Their state of duration is one year. At the same time, standards continue to add rigs under its new bill program. I previously mentioned the seventh standard new bill split in early July. Also, at the end of the third quarter, the eighth commences operations.
In Saudi Arabia, we have a number of items to update first I am sure you have seen reports of rig suspensions in the kingdom.
Speaker Change: Our joint venture with Saudi Aramco has received notice to suspend operation of three rigs out of 51 two of those suspensions began early in the fourth quarter. Their stated duration is one year.
Speaker Change: At the same time Saturday continues to add rigs under its Newbuild program I previously mentioned the seventh sounded newbuild spud in early July.
Speaker Change: So at the end of the third quarter the eighth commenced operations.
Anthony Petrello: The ninth is on schedule to deploy later this quarter. Another five are expected in 2025, and one more should start at the beginning of 2026.
Speaker Change: <unk> is on scheduled to deploy later this quarter. Another five are expected in 2025 and one more if she started the beginning of 2026.
Anthony Petrello: Next, I'll discuss our performance in the US. Daily rig margins in our lower 48 fleet remain robust above the $15,000 mark. This performance reflects the resilient market for our high performance rigs and the value they generate. Our focus remains on the portion of the market that demands performance and increasingly automation. The growth in low and lateral welds is an excellent illustration of this focus. Recently, we have drilled a number of laterals in excess of four miles. Multiple operators across basins are extending their lateral lengths. With our advanced fleet, we are in an excellent position to enable clients to complete their increasingly challenging welds.
Speaker Change: Next I'll discuss our performance in the U S.
Speaker Change: The only big margins in our lower 48 fleet remains robust above the 15000 dollar Mark. This performance reflects the resilient market for our high performance rigs and the value they generate.
Speaker Change: Our focus remains on the portion of the market that demands performance and increasingly automation the growth and long lateral wells is an excellent illustration of this focus recently, we have drilled a number of laterals in excess of four miles.
Speaker Change: Most of the operators across basins are extending their lateral lengths with our advanced we were in an excellent position to enable clients to complete their increasingly challenging wells.
Anthony Petrello: Our approach to pricing continues to be resolutely disciplined. That combination is yielding attractive financial results and generating significant free cash flow.
Our approach to pricing continues to be resolutely disciplined that combination is yielding attractive financial results and generating significant free cash flow.
Anthony Petrello: My earlier comments and are reporting on lower 48 daily rate economics do not include any contribution from NDS. In addition to our rig margin, NDS generates significant margin on its own. I'll discuss this in more detail in a moment.
My earlier comments and our reporting on lower 48 daily rig economics do not include any contribution from NDS.
Speaker Change: In addition to our rig margin N D. S generates significant margin on its own I'll discuss this in more detail in a moment.
Anthony Petrello: Next, let me discuss our technology and innovation. In the third quarter, NDS International revenue and EBITDA will each be up sequentially. NDS International margin expanded, and EBITDA grew by more than 10%. Our results in these markets are validating our strategy. Driven by that international performance, overall, NDS EBITDA met our expectations.
Speaker Change: Next let me discuss our technology and innovation in the third quarter NDS International revenue and EBITDA were each up sequentially N D. S International margin expanded and EBITDA grew by more than 10%. Our results in these markets are validating our strategy.
Speaker Change: Driven by that international performance overall, NDS EBITDA met our expectations.
Anthony Petrello: Now I'll discuss the lower 48 markets specifically. The average daily margin from our drilling and drilling solutions businesses combined was 18,700 in the third quarter. Of that, NDS contributed $3,618 per day. This measure, NDS lower 48 daily margin increased sequentially. During the quarter, we saw a shift in the mix of our NDS services as well as increased penetration on neighbors' rigs in the lower 48. Higher installations of our performance software and our automation suite, in particular, drove this growth. We saw expansion in the following automation systems: smart slide directional control, smart nav directional guidance, and smart drill drilling process automation.
Speaker Change: Now I'll discuss the lower 48 market specifically.
Speaker Change: The average daily margin from our drilling and drilling solutions businesses combined was 18700 in the third quarter.
Speaker Change: Of that NDS contributed $3618 per day, this measure and U S. Lower 48 daily margin increased sequentially.
Speaker Change: During the quarter, we saw a shift in the mix of our NDS services as well as increased penetration on nabors rigs in the lower 48.
Speaker Change: Higher installations of our performance software and our automation suite in particular drove this growth we saw expansion in the following automation systems Smart slide directional control smart now have directional guidance and smart drill drilling process automation.
Anthony Petrello: During the quarter, we also saw third-party growth in NDS smart ROS rig operating systems and rocket drill pipe oscillation software.
Speaker Change: During the quarter. We also saw third party growth and NDS Smart Rof's rig operating systems and rocket drill pipe oscillation software.
Anthony Petrello: Our results for the third quarter validated our strategies. We are expanding our international drilling rig presence and increasing the penetration of our automation software across our markets.
Speaker Change: Our results for the third quarter validate our strategies, we are expanding our international drilling rig presence and increasing the penetration of our automation software across our markets.
Anthony Petrello: Next, let me make some comments on our capital structure. During the quarter, we continue to work on our debt maturity profile through the issuance of seven-year notes. As of now, the weighted average maturity of our notes stands at approximately four and a half years. Neighbors has delivered over 80 million of free cash flow through three-quarters, net of 128 million of CAPEX supporting the Santa New Bill program. Heading into our strongest quarter of the year in terms of cash generation, we expect to retire debt with our free cash.
Speaker Change: Next let me make some comments on our capital structure.
Speaker Change: During the quarter, we continued to work on our debt maturity profile through the issuance of seven year notes.
Speaker Change: As of now the weighted average maturity of our notes stands at approximately four and a half years.
Speaker Change: Nabors has delivered over 80 million of free cash flow through three quarters net of $128 million of Capex supporting the Newbuild program.
Speaker Change: Heading into our strongest quarter of the year in terms of cash generation, we expect to retire debt with our free cash.
Anthony Petrello: I'll finish this part of the discussion with remarks on sustainability. Our energy transition portfolio focuses on improving operational performance and reducing emissions. Once again, in the third quarter, these solutions contribute to the results of our rig technology segment. The para-tap module, which connects rigs to the grid, remains the largest contributor to our ET business. The first para-tap unit in Argentina is related to begin work in the next couple of weeks. Operators in several other international markets have expressed interest in units. We are optimistic that interest will translate into sales.
Speaker Change: I'll finish this part of the discussion with remarks on sustainability.
Speaker Change: Our energy transition portfolio focuses on improving operational performance and reducing emissions.
Speaker Change: Once again in the third quarter. These solutions contributed to the results of our rig technology segment.
The power tap module, which can X rigs to the grid remains the largest contributor to our <unk> business.
Speaker Change: The first power tap unit in Argentina is slated to begin work in the next couple of weeks.
Speaker Change: Operators and several other international markets have expressed interest in units, we are optimistic that interest will translate into sales.
Anthony Petrello: Next, I will discuss the rig pricing environment. Our third quarter results in lower 48, once again, showed resiliency and leading edge market pricing. We remain disciplined in our approach as well. Our competitors continue to recognize the imprudence of chasing market share with discounting in a flat market.
Next I will discuss the rig pricing environment, our third quarter results in lower 48, once again showed resiliency in leading edge market pricing, we remain disciplined in our approach as well our competitors continue to recognize the imprudence of chasing market share with discounting in a flat market.
Anthony Petrello: In the international market, we have visibility to additional near-term rig awards. There are spread across geographies, including Asia, MENA, and Latin America. These markets are seeking as many as 40 rigs. The opportunities are located in countries where we work currently or that we consider attractive. Pricing into international markets continues to have an upward trend.
In the international market, we have visibility to additional near term rig awards, they're spread across geographies, including Asia Mena and Latin America. These markets are seeking as many as 40 rigs the opportunities are located in countries, where we work currently or that we consider attractive.
Pricing in the international markets continues to have an upward trend.
Anthony Petrello: We surveyed the largest lower 48 clients at the end of the third quarter. Our survey covered 15 operators comprising approximately 46% of the lower 48 industries working rigs at the end of the quarter. The latest survey indicates this group's year-end 2024 rig count will be somewhat lower than the total at the end of the third quarter. The expected decline results from a combination of merger-related consolidation and the wind down of certain drilling programs. Our survey is skewed toward the larger operators, including those that have participated in the recent industry consolidation.
Speaker Change: We surveyed the largest lower 48 clients at the end of the third quarter. Our survey covered 15 operators comprising approximately 46% of the lower 48 industry is working rigs at the end of the quarter.
Speaker Change: The latest survey indicates this group's yearend 'twenty 'twenty four rig count will be somewhat lower than the total at the end of the third quarter.
Speaker Change: Do you expect it to decline results from a combination of merger related to consolidation and the wind down of certain drilling programs. Our survey is skewed towards the larger operators, including those that have participated in the recent industry consolidation.
Anthony Petrello: For the international market, our view remains bullish. We are on track to add three rigs in the fourth quarter of 2024. With these additions and factoring into suspensions in Saudi Arabia, we expect to end the year with 85 international rigs working. As we look to 2025, we have nine rig awards that are scheduled to be deployed during the year, five new bills in Saudi Arabia, one activation in Argentina, and three activations in Kuwait.
Speaker Change: For the international market. Our view remains bullish we are on track to add three rigs in the fourth quarter of 2024 with these additions and factoring into suspension to Saudi Arabia, we expect to end the year with 85 international rigs working.
Speaker Change: As we look to 2025, we have nine rig awards that are scheduled to deploy during the year five new builds to Saudi Arabia, one activation in Argentina, and three Activations in Kuwait. In addition to deny and I've. Just mentioned, we have identified a significant number of incremental opportunities so stay tuned.
Anthony Petrello: In addition to the nine I just mentioned, we have identified a significant number of incremental opportunities, so stay tuned.
Anthony Petrello: Next, I will share a couple of highlights from the quarter in addition to those we announced in the press release. The common thread in all of our highlights is the strong element of our advanced technology solutions. An operator in the UN Tab Basin drilled what it believes is a record three-mile lateral in that basin. This was accomplished on a third-party rate. It ran NDS Smart Cruise owner, driller, Revit six foot mitigation and Smart Drill process automation. This well is a notable example of NDS's opportunity to drive value for our customers. Another operator drilled the three fastest wells into Powder River Basin using NDS Smart Drill on a third party rig.
Speaker Change: Next I will share a couple of highlights from the quarter. In addition to those we announced in the press release the common thread in all of our highlights is a strong element of our advanced technology solutions.
And operator in the Uinta basin drilled what it believes is a record three mile lateral in that basin.
Speaker Change: This was accomplished in the third party rate it ran nds's smart cruise auto driller, rather stick slip mitigation as smart rail process automation. This well is a notable example of nds's opportunity to drive value for our customers.
Speaker Change: Another operator drilled the three fastest wells in the powder River basin, using Nds's smart drill onto third party rig. This project illustrates the repeat ability of the MTS value creation. It further demonstrates nds's success targeting the third party rig market.
Anthony Petrello: This project illustrates the repeatability of the NDS value creation. It further demonstrates NDS's success targeting the third-party rig market.
William Restrepo: Now, let me turn the call over to William, who will discuss our financial results. Thank you, Tony, and good morning, everyone. Our third quarter, drilling rig activity was stable, both in the US and in international markets. NDS results were strong, reflecting growing international activity, particularly in casing running. Our data and software offerings also increased in the US and international markets; rig technologies generally lag, driven by sluggish sales in the US market.
Speaker Change: Now, let me turn the call over to William who will discuss our financial results.
William: Thank you Tony and good morning, everyone.
William: Our third quarter drilling rig activity was stable both in the U S and international markets Andy.
William: <unk> results were strong, reflecting growing international activity, particularly in casing running.
William: Our data and software offerings also increased in the U S and international markets.
William: Rig technologies generally lagged driven by sluggish sales in the U S market.
William Restrepo: Ltd. The transfer of experience should continue into the fourth quarter.
William: The trends, we've experienced should continue into the fourth quarter.
William Restrepo: U.S. law of 48 drilling rigs should remain stable, with similar rig count and pricing, and international will continue to expand with three additional rigs deployed in Saudi Arabia and Argentina. Sana was affected by the drilling reductions in Saudi Arabia. During the quarter, we were notified that three of our 51 rigs were scheduled for 12-month suspensions, starting in the fourth quarter. I will point out, though, that the suspended rigs are substantially lower-margin performers as compared to the new deployments. There has been no indication of further suspensions, and the cadence of new build deployments remains unchanged. We expect fourth quarter increases in NDS activity in both U.S.
William: U S lower 48 drilling rigs should remain stable with similar rig count and pricing and international will continue to expand with three additional rigs deployed in Saudi Arabia and Argentina.
William: China was affected by the drilling reductions in Saudi Arabia.
William: During the quarter, we were notified that three of our 51 rigs were scheduled for 12 months suspension starting in the fourth quarter.
William: I will point out, though that the suspended rigs are substantially lower margin performers as compared to the new deployments.
There has been no indication of further suspensions and the cadence of Nobel deployment remains unchanged.
William: We expect fourth quarter increases in NDS activity in both U S and international markets rig.
William Restrepo: and international markets. Rig technologies is expected to improve as increased deliveries of equipment are forecast for the fourth quarter. Revenue from operations for the third quarter was $732 million, essentially in line with a prior quarter.
William: Rig technologies is expected to improve as increased deliveries of equipment are forecast for the fourth quarter.
William: Revenue from operations for the third quarter was $732 million essentially in line with the prior quarter.
William Restrepo: Our U.S. Drilling segment decreased by $5 million. In terms of activity, lower 48 revenue days were around the same level as the prior quarter, but as we forecast, revenue per day for the fleet fell as contracts continued to roll into the current rates. Lower 48 revenue decreased by 1.7%. Average daily revenue for the third quarter came in at $34,812, as the sequential decrease of $522. Leading edge pricing held up well. On our latest contracts, revenue per day has remained at the low to mid $30,000 range. This level has held since the beginning of 2023. Revenue from our international segment increased by $11.9 million, or 3.3% for the quarter.
William: Our U S drilling segment decreased by $5 million.
William: In terms of activity lower 48 revenue day were around the same level as the prior quarter.
William: But as we forecast revenue per day for the fleet fell as contracts continue to roll into the current rates.
William: Lower 48 revenue decreased by one 7%.
William: Average daily revenue for the third quarter came in at $34812, a sequential decrease of $522.
William: Leading edge pricing held up well on our latest contracts revenue per day has remained at the low to mid 30000 dollar range. This level has held since the beginning of 2023.
William: Revenue from our international segment increased by $11 $9 million or three 3% for the quarter.
William Restrepo: In Saudi Arabia, we successfully deployed the eighth new build grid, and we started one more rig in Algeria, bringing our total working count to four in that country. Our remaining working rig in Kuwait finished operations during the third quarter. It is currently being prepared for its new contract. It should resume operations in early 2025, along with two other rigs. Neighbour-threading solutions revenue of $79.5 million declines sequentially by $3.4 million, or 4.1%. Healthy revenue increases in international NDS, and in performance software globally were more than upset by reduced activity in U.S. land, primarily in our lower margin business lines.
In Saudi Arabia, we successfully deployed the eight newbuild rig and we started one more rig in Algeria, bringing our total working count to four in that country.
William: Our remaining working rig in Kuwait finished operations during the third quarter.
William: It is currently being prepared for this new contract.
William: It should resume operations in early 2025, along with two other rigs.
William: Nabors drilling solutions revenue of $79 $5 million declined sequentially by $3 4 million.
William: Or four 1%.
William: Healthy revenue increases in international NDS.
William: And in performance software globally.
William: Were more than offset by reduced activity in U S land.
William: Primarily in our lower margin business lines.
William Restrepo: Compared to the third quarter, NDS increased international revenue by 8.3%. Revenue in our rig technology segment at $45.8 million fell by $3.7 million, driven by lower deliveries of capital equipment and spare parts in the U.S. as well as a drop-off in energy transition.
William: Compared to the third quarter and he asks increased international revenue by eight 3%.
William: Revenue in our rig technologies segment at $45 $8 million fell by $3 7 million driven by lower deliveries of capital equipment and spare parts in the U S as well as a drop off in energy transition.
William Restrepo: Now turning to EBITDA and the outlook. Total EBITDA improved by $3.7 million to almost $222 million in the third quarter, at a 1.7% increase. USD $108.7 million was down by $5.4 million or 4.7% sequentially during a very narrow by our lower 48 business. In the lower 48, our 68 average rates were just below the power quarter, but they were a couple of rates below our expectations as we saw no increases in general market activity and our turn remained high. Average daily rig margins came in at $15,051, down $547 from the second quarter and essentially in line with our forecast.
Now turning to EBITDA and the outlook.
Total EBITDA improved by $3 $7 million to almost $222 million in the third quarter.
William: A one 7% increase.
William: U S drilling EBITDA of $108 7 million was down by $5 4 million or four 7% sequentially driven primarily by our lower 48 business.
William: In the lower 48, or 68 average rigs were just below the prior quarter.
William: They were a couple of rigs below our expectations as we saw no increases in general market activity and our churn remained high.
William: Average daily rig margins came in at $15051.
William: <unk> $547 from the second quarter and essentially in line with our forecast.
William Restrepo: This reduction was driven by a similar decrease in our revenue per day. For the fourth quarter, we project our lower 48 daily margins at $15,000 as our fleet average pricing converges with our leading edge day rates. We anticipate our recount in this market to remain at about 68 for the fourth quarter. Our forecast is dependent on stable oil prices, a similar level of turn and stability in the Lower 48 market. On a net basis, Alaska and the U.S. offshore businesses performed somewhat better than we anticipated. In the third quarter, the combined EBITDA these two operations was $20.8 million.
William: This reduction was driven by a similar decrease in our revenue per day.
William: For the fourth quarter, we project, our lower 48 daily margins at $15000.
William: Our fleet average pricing converges with our leading edge dayrates.
William: We anticipate our rig count in this market to remain at about 68 for the fourth quarter.
William: Our forecast is dependent on stable oil prices at similar level of churn and stability in the lower 48 market.
William: On a net basis, Alaska and the U S offshore businesses performed somewhat better than we anticipated.
William: In the third quarter the combined EBITDA of these two operations was $28 million.
William Restrepo: In the fourth quarter, combined EBITDA for these two markets should increase by approximately $1.5 million, driven by increasing activity in Alaska. Internationally, EBITDA at $160 million was up $9.6 million, or 9%, despite only slight growth in the average working risk count. Daily growth margin increased by over $1,000 from approximately $16,050 to $17,080. This improvement is somewhat ahead of schedule and primarily reflects substantially better-than-normal results in Saudi Arabia, as well as increased contributions from the standard new builds. Saudi Arabia margins improved by almost $1,200. Latin America also did exceptionally well, improving by over $1,300 per day.
William: In the fourth quarter combined EBITDA for these two markets should increase by approximately $1 $5 million driven by increasing activity in Alaska.
William: Internationally EBITDA at $116 million was up $9 6 million or 9%.
William: Despite only slight growth in the average working rig count.
William: Daily gross margin increased by over $1000 from approximately 16050 to 17080 missing.
William: This improvement a somewhat ahead of schedule and primarily reflect substantially better than normal results in Saudi Arabia as.
William: As well as increased contributions from the stand at noodles.
William: Saudi Arabia margins improved by almost $1200.
William: Latin America also did exceptionally well improving by over $3500 per day.
William Restrepo: Argentina benefited from performance bonuses and incentive contracts, and Mexico experienced fewer low margin moves between rigs than in power quarters. Our fourth quarter forecast assumes the startup of the 9th standard new build rig and two deployments in Argentina, offset by the rigs dispensions in Saudi Arabia. Rig count in the fourth quarter should remain somewhat level with the third quarter at 84 rigs. We anticipate average daily growth margins to come in at $17,000, in line with the third quarter. Our fleet mix should improve in the fourth quarter. However, the better the non-performance we experience in several geographies will be tough to match.
William: Argentina benefited from performance bonuses and incentive contracts.
William: And Mexico experienced fewer low margin moves between rigs than in prior quarters.
William: Our fourth quarter forecast assumes the startup of the ninth Senate Newbuild rig and two deployments in Argentina.
Offset by the rigs suspension and Saudi Arabia.
William: Rig count in the fourth quarter should remain somewhat level with the third quarter at 84 rigs.
William: We anticipate average daily gross margins to come in at $17000 in line with the third quarter.
William: Our fleet mix should improve in the fourth quarter.
William: However, the better than nonperformance, we experienced in several geographies will be tough to match.
William: Joining solutions delivered EBITDA of $34 $3 million in the third quarter up five 7%.
William Restrepo: During Solutions delivered EBITDA of $34.3 million in the third quarter, up 5.7 percent, and gross margin reached 53 percent. Among product lines, the largest improvements were in casing running services, performance software, and rig cloth.
William: And gross margin reached 53%.
William: Among product lines, the largest improvements were in casing running services performance software and Rick cloud.
William Restrepo: U.S. EBITDA was likely above the prior quarter, despite a material revenue decrease. In that market, our revenue mix was favorable, reflecting a higher proportion of performance software and data solutions revenue. At the same time, we experienced a decline in lower margin well bore placement activity. Internationally, EBITDA expanded by 12% as our casing running services were particularly strong, and our software revenue grew. NDS gross margin per day for the lower 48 was $3,618, a 3.3% increase compared to the second quarter. This improvement took our combined drilling rig and solutions daily gross margin to approximately $18,700. For the fourth quarter, we are targeting higher NDS EBITDA by approximately 7% over the third quarter level.
William: U S EBITDA was slightly above the prior quarter, despite a material revenue decrease.
William: In that market, our revenue mix was favorable reflecting a higher proportion of performance software and data solutions revenue.
At the same time, we experienced a decline in lower margin Wellbore placement activity.
William: Internationally EBITDA expanded by 12% as our casing running services were particularly strong in our software revenue grew.
William: NDS gross margin per day for the lower 48 was $3618.
William: Three 3% increase compared to the second quarter.
William: This improvement took a combined Julian Reagan solutions daily gross margin to approximately $18700.
William: For the fourth quarter, we are targeting higher NDS EBITDA by approximately 7% over the third quarter level.
William Restrepo: We expect increases in both international and U.S. markets. Rig technologies delivered EBITDA of $6.1 million in the third quarter compared to $7.3 million in the second. The decrease in EBITDA came primarily from lower sales of energy transition products and spare parts in the U.S. Capital equipment shipments also declined. Fourth quarter EBITDA should be in the range of $9 to 10 million, reflecting several large equipment deliveries that slipped into the fourth quarter.
William: We expect increases in both international and U S market.
William: Rig technologies delivered EBITDA of $6 1 million in the third quarter compared to $7 3 million in the second.
William: The decrease in EBITDA came primarily from lower sales of energy transition products and spare parts in the U S.
William: Capital equipment shipments also declined.
William: Fourth quarter EBITDA should be in the range of $9 million to $10 million, reflecting several large equipment deliveries that slipped into the fourth quarter.
William Restrepo: Now, turning to liquidity and cash generation. In the third quarter, free cash flow totaled $18 million. This compares to free cash flow of $57 million in the second quarter. The third quarter included interest payments of approximately $82 million, as compared to $31 million in the second. A significant portion of these interest payments was related to the notes we issued towards the end of last year, with their initial coupon due eight months after issue. The extra two and a half months of interest equates to approximately $11.7 million. Capital expenditures of $118 million in the third quarter were $20 million below the preceding quarter.
William: Now turning to liquidity and cash generation.
William: In the third quarter free cash flow totaled $18 million.
William: This compares to free cash flow of $57 million in the second quarter.
William: The third quarter included interest payments of approximately $82 million as compared to $31 million in the second.
William: A significant portion of these interest payments was related to the notes we issued towards the end of last year, where their initial coupon to eight months after issue.
William: The extra two and a half months of interest equates to approximately $11 $7 million.
William: Capital expenditures of $118 million in the third quarter were 20 million below the preceding quarter.
William Restrepo: The third quarter included $37 million for the Senate new bills. Our target capric for the fourth quarter is now $230 million, with capric for Senate new bills now forecast at $105 million. The resulting annual capric forecast for 2024 is now $600 million. This includes $230 million related to the Senate New Bills. In Saudi Arabia, the Senate's rig supplier has improved its performance and manufacturing milestones. We now expect early delivery of new bills rigs going forward. As a result, approximately $40 million of new billed Capric has now moved up into 2024. We're targeting reductions in various geographies to offset this increase.
William: Third quarter included $37 million for the <unk>.
William: Our targeted capex for the fourth quarter is now $230 million.
William: With Capex percent of new builds now forecast at $105 million.
The resulting annual Capex forecast for 2024 is now $600 million.
William: This includes 230 million related to the sign of newborns.
William: In Saudi Arabia Senate to rig supply has improved its performance and manufacturing milestones.
William: We now expect earlier delivery of Newbuild rigs going forward as.
William: As a result.
William: Similarly, $40 million of Newbuild Capex has now moved up into 2024.
William: We're targeting reductions in various geographies to offset this increase.
William Restrepo: Given Senate's new billed capric shift into 2024, the recent risk of suspensions by Aramco and a slightly lower U.S. activity in the fourth quarter, we now expect our 2024 free cash flow to end up between $130 million.
Given soundness Newbuild capex shift into 2024.
William: The recent rig suspensions by Aramco.
And a slightly lower U S activity in the fourth quarter.
William: We now expect our 2020 for free cash flow to end up between 101 hundred $30 million.
William Restrepo: Last week, we signed an agreement to acquire Parker World War. The transaction is well aligned with our long-term strategy. It grows our Capix-Lite NDS business; it expands our international footprint; and it helps us deliver neighbors. Additionally, Parker is expecting to provide meaningful EBITDA of $180 million in 2024 with attractive growth going forward. And finally, Parker comes with a low-dead, clean balance sheet and has positive cash flow, even before targeted annual synergies of $35 million.
William: Last week, we signed an agreement to acquire Parker Wellbore.
William: The transaction is well aligned with our long term strategy.
William: It grows our capex light and Es business and expand our international footprint and it helped us delever neighbors.
William: Additionally, Parker is expecting to provide meaningful EBITDA of $180 million in 2024.
William: With attractive growth going forward.
William: And finally Parker comes with a low debt clean balance sheet and as positive cash flow.
William: Even before targeted annual synergies of $35 million.
Anthony Petrello: We are excited with the addition of Parker to our existing platform, and with that, I'll turn the call to Tony for his concluding remarks.
William: We are excited with the addition of Parker to our existing platform.
And with that I'll turn the call to Tony for his concluding remarks.
Anthony Petrello: Thank you, William.
Tony: Thank you William I will now conclude my remarks this morning.
Anthony Petrello: I will now conclude my remarks this morning. Our performance in the international markets, and our advanced solutions continue to deliver industry-leading performance across the client base. With our pipeline of awards and additional opportunities, we have a clear path to strong expansion in our international segment. We believe this increased growth will drive this segment's free cash flow significantly higher. With this expansion, the drilling solutions business has the potential to grow at a faster rate. NDS' penetration internationally is accelerating. Operators there are increasingly looking to NDS' achievements in lower 48 and see a path to duplicate that success.
Tony: Our performance in the third quarter met our expectations, we deployed additional rigs in our international markets in our advanced solutions continued to deliver industry, leading performance across the client base.
Tony: With our pipeline of awards and additional opportunities we have a clear path to strong expansion in our international segment.
Tony: We believe this increased growth will drive this segment free cash flow significantly higher.
Tony: With this expansion the drilling solutions business has the potential to grow at a faster rate nds's penetration internationally is accelerating operators. There are increasingly looking to nds's achievements in lower 48, and see a path to duplicate that success at.
Anthony Petrello: And as a final thought, the prospect of adding Parker expands the portfolio and essentially doubles the size of NDS.
Tony: And as a final thought the prospect of adding Parker expansive portfolio and essentially doubles the size of NDS.
Anthony Petrello: That concludes my remarks.
Tony: That concludes my remarks today. Thank you for your time and attention with that we will take your questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. But any time your question has been addressed and you would like to withdraw your question, please press star, then two.
Speaker Change: Well now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: Using a speakerphone please pick up your handset before pressing the keys, but anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: At this time, we'll pause momentarily to assemble a roster.
Speaker Change: At this time, we'll pause momentarily to assemble our roster.
Aaron Jerem: Our first question comes from Aaron, Jerem, with J.P. Morgan. Please go ahead.
Speaker Change: And our first question comes from Erin J M with J P. Morgan. Please go ahead.
Aaron Jerem: Yeah, good morning. Good morning.
Speaker Change: Yeah good morning.
Speaker Change: Morning, Tom.
Anthony Petrello: Tony, I wanted to start with the recent acquisition of Parker Wellbore. I was wondering if you could talk about the businesses and what kind of economic vote do you see in some of the businesses, the surface of the tubulars relative to NDS? And if you just broadly discuss kind of the capital intensity of that segment, as you integrate that with your existing businesses within NDS?
Speaker Change: Tony I wanted to start with the with the recent acquisition of Parker Wellbore I was wondering if you could talk about the businesses and what kind of economic moat do you see in some of the businesses. The surface of the tubular is relative to to N. D. S. You just broadly discuss kind of the capital.
The intensity.
Speaker Change: That segment is as you integrate that with your existing businesses with an N D S.
Anthony Petrello: Sure.
Speaker Change: Sure well first of all I think.
Anthony Petrello: Well, first of all, I think there's three principal areas. First is it's a layup with the existing rates in jurisdictions like Alaska for the O&M contracts for maintenance of offshore rates. That fits in, yeah, squarely with what we do today. And obviously there's obviously course synergies that are hopefully easily grabbed. So that's in the base business.
Speaker Change: There's two principal three principal areas first is its a lay up with existing rigs in jurisdictions like Alaska for us.
Speaker Change: Both your O&M contracts for offshore maintenance of offshore rigs.
Speaker Change: Yeah squarely with what we do today, and obviously theres, obviously cost synergies that are hopefully easily grabbed.
Speaker Change: So that's in the base business then the two principle areas are as you pointed out the well construction, which principally right now is casing running into some fishing in that as well.
Anthony Petrello: Then the two principal areas are, as you point out, the well-construction, which principally right now is casing running. There's some fishing in that as well. The casing running business, they have presences both in the US, Saudi, and the UAE, which complement all markets for us as well. And there, as you know, we have a strategy of migrating to an integrated model. And so with that active base, we're hopeful that we're going to actually get higher margins out of that as we move them to a model where you use less people and more automation in carrying out those services.
Speaker Change: The case, you're running business they have presences, both in the U S, Saudi and the UAE, which complement all markets for us as well and there as you know we have a strategy of migrating to an integrated model and so with that active base. We're hopeful that we're going to actually get higher margins out of that as we move them to a model where.
Speaker Change: You use less people and more automation in carrying out those services, that's the upside in that business as well and combined I think were pretty significant player. When we when you when we combine forces and then the third is quail, which as you've heard from what we broke is a is it bad frankly on the first of all <unk>.
Anthony Petrello: That's the upside in that business as well. And combined, I think we're a pretty significant player when we combine forces.
Anthony Petrello: And then the third is Quail, which, as you've heard from what we wrote, is a bet, frankly, on the, first of all, Quail is an industry, I think, a kind of a goal-played company. It has a great reputation in the US. It's been covered by many people over the years. It's always speeded well against other people in the industry, including with some of their own Thomas tools. You know, I think the guys are established track record. There's no question they're first class. And there, that's the bet on the longer laterals, which we see continuing. And you can see from our, our announcements say about what success we have had.
Speaker Change: Industry I think of.
Speaker Change: Kind of a go play a company has a great reputation in the U S. It's been covered by many people over the years. It has always competed well against other people in the industry, including with some of J O Thomas tools.
Speaker Change: You know I think the guys are have established track record. There is no question there first class and there that's the bet on on the longer laterals, which we see continuing and you can see from our announcements say about what success. We have had I think it's clear that.
Anthony Petrello: I think it's clear that, economically, operators are going to be driven to longer laterals to make some more sense. And that's the way for.
Speaker Change: Economically operation can be driven to longer laterals it makes more sense.
Speaker Change: And that's the way for.
William Restrepo: with equal recounts for us to get more content per well with the longer ladders with what they do and so when you combine it all I think William can comment on a cap intensity but I think the quail free cash low number is historically 60 to 70% that kind of range out obviously NDS itself is higher than that which is one thing we we covet which is close to 85 but of course NDS has all that software and as I mentioned though part of our mission here is to drive at least a portion that won't work well construction activity to our model which is a little more capital light than what they've done historically but that that was the thinking behind it so it's and obviously the price that we pay is a very attractive entry price and you know we think we have synergies as on the top of it and it improves all our financial metrics as you as you know and so when you work work it through I think there's just as well of an industrial logic so with that I'll miss a quick one no you said is it everything I would have said but the one question that you answered about the capital intensity the way we look at it is free cash conversion from EBITDA and the quality of all of partners EBITDA is quite high in fact I must say that given the proportions of what they do it's even a little bit better than our global free cash conversion so if you look at our legacy rig business which means exclude the new builds in Saudi Arabia and NDS just a drilling rig business our free cash conversion is about 47% quail comes with 60 to 70% so in a relative basis it does improve our free cash conversion for the company as a whole and it does take our NDS footprint from 15% of the total to about 31% of the total which is one of the objectives that we have longer term we have said that we wanted to take NDS to about 20 to 25% of our total business for the obvious reasons it is faster growth and of course it brings less capital than in a traditional drilling rig business but with but with Parker we take that number from 15 to 31% so we are pretty happy with our transaction and two other follow-on comments on that first of all with respect to the number of shares on the transaction obviously with no luck with transaction we think that had value to it because it does improve the various metrics including our leverage which we think is good and the whole transaction gives us size which we think will eventually will lead us to a path rereading us both from an investment bond rating as well as a multiple rating on the transaction so that's the thinking in terms of free cash flow though you should note that when you crank the numbers the free cash flow per share today it's a creative to free cash flow per share with the dilution on the transaction that's number one so that that's again part was part of our thinking it does improve our free cash flow per share because what William just said on the transaction the other thing I also tell you to look at look at the fact that the deal doesn't have a collar on it and the collar was meant to protect neighbor shareholders and in fact if people do realize the value of neighbors predestheal like they should because what the thing is going to trade at if the deal trades at a a multiple around what we've been training at now if you just crank the numbers stock price actually should be higher than what the collar price is and the actual number of shares would actually get cut down so that that's a protective device that was built into the transaction for the shareholders if they will recognize the value of the transaction so hopefully you guys will do that when you write up an analysis of it but it does it does work out that way and that's another feature of the deal Great.
Speaker Change: With equal rig counts for us to get more content per well with the longer laterals with what they do and so when you combine it all I think William can comment on our capital intensity, but I think to quell our free cash flow number historically, 60% to 70% that kind of range. Obviously NDS itself is higher than that which is one.
Speaker Change: Thanks.
Speaker Change: We covered which is closer to 85, but of course I have Andy is has all the software and as I mentioned are part of our mission here is to.
Speaker Change: Drive at least a portion of that Wellbore, well construction activity to our model, which is a little more capital light and what they've done historically.
Speaker Change: But that was the thinking behind it so it's a and obviously the price that we pay is a very attractive entry price.
And Oh, we think we have synergies on top of it and it improves all our financial metrics as you as you know and so when you work worked it through I think a there's a J J just has more of an industrial logic.
Speaker Change: So with that I missed I know you.
Speaker Change: You said, you said everything I would've said, but the one question that you answered about the capital intensity the way we look at it as free cash conversion from EBITDA.
Speaker Change: And the quality of.
Speaker Change: All of Parker's EBIT diced quite high in.
Speaker Change: In fact, I must say that given their proportions of what they do it's even a little bit better than our global.
Speaker Change: Free cash conversion. So if you look at our legacy rig business, which means exclude the nobility in Saudi Arabia, and NDS, just the drilling rig business, our free cash conversion is about 47%.
Speaker Change: Quail comes with 60% to 70% so on a relative basis. It does improve R. R.
Speaker Change: Our free cash conversion for the company as a whole and it does take our NDS footprint from 15% of the total to about 31% of the total which is one of the objectives that we have longer term. We have said that we wanted to take India to about 20% to 25% of our total business for the obvious reason there is faster growth and of course it brings less.
Speaker Change: Capex than a traditional drilling rig business, but with the <unk>.
Speaker Change: With Parker, we take that number from 15% to 31%. So we are pretty happy with that transaction.
Two other follow on comment on that first of all with respect to the number of shares on the transaction. Obviously was an all equity transaction, we think that had value to it because it doesn't improve the various metrics, including our leverage which we think is good.
Speaker Change: The whole transaction gives us size, which we think will eventually will lead us to a path to be a re rating us both from a investment bond rating as well as our multiple waiting on the transaction. So that's the thinking in terms of free cash flow, though you should note that when you crank the numbers the free cash flow per share today, it's accretive to free cash flow per share.
Speaker Change: With the dilution on the transaction that's number one so that's again part was part of our thinking it does improve our free cash flow per share because what we've just said on the transaction. The other thing I'd say I'd also tell you to look at look at the fact that the deal does have a collar on it and the caller was meant to protect nabors shareholders and in fact, if people do realize.
Speaker Change: The value of Nabors pre.
Speaker Change: Pre the steel like they should because what the thing is going to trade at.
Speaker Change: The deal trades at a multiple around what we've been trading at now you just crank the numbers the stock price actually should be higher than what the collar prices and the actual number of shares we'd actually get cut down. So that's a protective device that was built into the transaction for the shareholders. If they will recognize the value of the transaction so hopefully.
Speaker Change: You guys will do that when you write up in the analysis of it but it does it does work out that way.
Speaker Change: Another feature of the deal.
Speaker Change: Great. Thanks for that additional color was very helpful. Tony I wanted to follow up on on slide 15, because I have gotten a few buy side queries on the slide.
Aaron Jerem: Thanks for that additional color. It's very helpful.
Operator: I wanted to follow up on slide 15 because I have gotten a few biceye queries on the slide. In the broader context, how do we think about efficiency gains, and how does that impact kind of your view of rig demand in 2025? Because we're quite surprised to see the ability to take a third off of well cycle times over the last four quarters. Obviously, it is using some of your technology.
Speaker Change: And in the broader context is is how do we think about efficiency.
Speaker Change: Efficiency gains in and how does that impact kind of your view of a rig demand in 2025.
Speaker Change: Cause you know where were quite surprised to see you know the ability.
Speaker Change: To take a third off of well cycle times over the last four quarters. Obviously it is using some of your technology, but could you give us a sense of from a rig or efficiency gain perspective, what kind of D and drilling efficiency gains or are you seeing on a year over year basis.
Anthony Petrello: But can you give us a sense of, from a rig or efficiency gain perspective, what kind of drilling efficiency gains are you seeing on a year-over-year basis, and what are the implications for lower 48 demand in 2025? Because the numbers are quite remarkable to be taking a third off of well cycle times. This late and how mature US shale is today. I do think there is a lot of diminishing returns on existing infrastructure that we have today. I think we're approaching that with some operators where we have some very large independence that are first class in extracting all benefits.
Speaker Change: What are the implications for lower 48 demand in 2025, because the numbers are quite.
Speaker Change: Remarkable to be taking a third off of well cycle times. This this late and how mature the.
Speaker Change: U S shale is today.
Speaker Change: I do think there is a law of diminishing returns on an existing infrastructure that we have today, so and I think we're approaching that with some operators, where we have some very large independents that are first class and extracting all benefits until they are pushing the rigs you awfully hard and it's hard it's hard to say that.
Anthony Petrello: They're pushing the rigs awfully hard. It's hard to say that you're going to see that curve continue to develop. Obviously, everyone is now focused on flat time. Flat time is the area that you want to really improve things on. From our point of view, obviously, the longer laterals and having rigs that can service the longer laterals change the economic to the well. That's really meeting less rigs, but it changes the economic to the well, which is positive for us.
Speaker Change: You're going to see that kind of curve continuing to develop now obviously everyone's now focused on flat time flat time is the area that you want to really improve things Don.
From our point of view.
Speaker Change: Obviously, the last longer laterals, and having rigs that can service the longer laterals change the economics of the well and so I'm.
Speaker Change: Not necessarily meeting less.
Speaker Change: Less rigs would it change the economics of the well which is positive for us.
Anthony Petrello: The other thing I would say is, from our point of view, looking forward to create a competitive advantage for neighbors, we've invested in some technology stuff to make the drilling process and more value to the overall well-construction, by well-construction, including completion. Some of the downhill tools that we have, we're hoping that operators are going to realize the potential of using them to help them actually gain information while drilling that will help them not only geostere better and optimize that, but also help with the completion design. That's the lake we see; that's the next lake to help attack, which is helping the operator realize better economics of the well-board from the production side, the UR recovery, and whatever we can do and put into our rigs to help that happen. If we think we'll be upside, and that's one of the things that neighbors just focused on a little bit different than other people right now.
Speaker Change: The other thing I would say is from our point of view looking forward to create a competitive advantage for nabors, we've invested in some technology stuff to make the drilling process.
Speaker Change: More value to the overall well construction by well construction, including completion. So some of the downhole tools now that we have we're hoping operationally realize the potential of using them to help them actually gained information while drilling that will help them not only geosphere better and optimize that but also helped with the completion design.
Speaker Change: That's the that's the way we see the next like two to help attack, which is helping the operator realize better economics out of the Wellbore from the production side EUR recovery and.
Speaker Change: Whatever we can do and put into our rigs to help that happen. If we think it will be upside and that's one of the things that nabors has focused on a little bit different than other people right now.
Operator: Great, thanks a lot. I'm going to add to our room because it's a great question.
Speaker Change: Great. Thanks, a lot I'm going to back to our room, because it's a great question and I got back in when we had the last peak back in 2014, or so I think our our revenue our margin per day peaked at $11000.
William Restrepo: I think back in, when we had the last peak back in 2014 or so, I think our revenue, our margin per day, peaked at $11,000, and at the more recent peak, we think that $17,000, so that's a significant amount of value being delivered by a rig. And on top of that, we had over $3,000 of NDS revenue, which is specifically related to that value of creation that Tony was talking about. So we were, you know, comfortably above the $20,000, almost double the margins were getting out of our rig platform, and we used to get at the last peak.
Speaker Change: And.
Speaker Change: And we are at the moment more recent peak, we peaked at $17000. So that's a significant amount of value being delivered by our rate and on top of that we had over $3000 of NDS revenue, which is specifically related to that value creation that Tony was talking about so we were.
Comfortably above the $20000 almost double the margins, we're getting out of our <unk> platform and we used to get at the last peak. So I think that shows that yes, there's efficiency, but we're also benefiting from that efficiency ourselves because that means that with a lower.
William Restrepo: So I think that shows that, yes, there's efficiency, but we're also benefiting from that efficiency yourself, because that means that with a lower capital investment, we're getting it twice, or, you know, we're getting a significant amount of returns without having to invest in capital. And that's better for me. very clear. Thanks a lot.
Speaker Change: Total investments were getting twice.
Speaker Change: You know, we're getting we're getting significant amount of return without having to invest in capital and thats better for Nabors.
Speaker Change: Very clear thanks, a lot.
Operator: Thank you.
Speaker Change: Thank you.
Dan Cuts: Our next question comes from Dan Cuts with Morgan Stanley. Please go ahead.
And our next question comes from Dan Kutz with Morgan Stanley. Please go ahead.
Dan Cuts: Hey, thanks. Good morning.
Dan Kutz: Hey, Thanks, good morning.
Dan Kutz: Morning.
William Restrepo: So, I just wanted to ask a question on Saudi pricing as we've been getting this question from some investors and hearing some comments. But you guys had flagged the three 12-month Saudi suspensions and that they were lower margin rates. But just asking if there's any chance you could comment on what we've been hearing that, you know, Saudi is kind of asking for pricing and confession from its service companies. And then I guess, regardless, just more broadly, we'd love to hear your comments on pricing and margin trends that you're seeing in the international drilling space. Thanks.
Dan Kutz: So I just wanted to ask a question on Saudi pricing.
Dan Kutz: Ben.
Dan Kutz: Getting this question from some investors in and hearing some comments, but you guys had flagged the the 312 months, Saudi suspensions and that they were lower margin rigs, but but just <unk>.
Dan Kutz: Asking if there was any chance you could comment on what we've been hearing that Saudi is kind of asking.
Dan Kutz: For pricing concessions from service companies and then I guess, regardless just more broadly would love to hear your comments on pricing and margin trends that you're seeing in the international drilling space. Thanks.
Anthony Petrello: Let me give you some color on Saudi Arabia first. Saudi about 55 rigs came down here today. I think 28, not sure, 27 on land. And as you noted, I think today there's around 208 rigs working. And as we know that we had 51, and we have no such three suspensions that were putting back one in the fourth quarter, so we're going to have 49. So, on a relative basis, obviously we're in a very strong position. And that's strong position reflects the fact that, you know, today probably 80% of our rigs are on gas directed well. The number one, number two, that the most far oil rigs are on recently extended four-year contracts.
Speaker Change: Let me give you some color on Saudi Arabia first Saudi about 55 rigs came down year to date, I think 28, North shore 27 on land as you noted.
Speaker Change: I think today, there's around 208 rigs working.
As we noted we had 51 and we have noticed with three suspension and were putting back one in the fourth quarter. So we're gonna have 49.
Speaker Change: So on a relative basis, obviously, we're a very strong position and that strong position reflects the fact that.
Speaker Change: Today, probably.
Speaker Change: 80% of our of our rigs are on a gas directed.
That's number one number two that the.
Speaker Change: Our most of our oil rigs or on recently extended four year contracts. So in terms of nabors itself is.
Anthony Petrello: So, in terms of neighbors itself, it's in a pretty good position. Secondly, obviously, the driver there is the new bill program, and there has been absolutely no change in rates or cadence of the new bill program. Ramp goes very committed to it. And we're all going to distance on it, which, obviously, in this kind of environment, is a little bit of an outlier when you're investing new dollars. And that explains in part why our free cash flow is tax because we are investing, you know, as William said, 230 million dollars in CapEx in new bill rigs. In fact, the knowing industries doing that.
Speaker Change: It's been a pretty good position.
Speaker Change: Lee.
Speaker Change: Obviously the driver the areas the Newbuild program and there is absolutely no change in rates or or cadence of the Newbuild program.
Speaker Change: Raptor is very committed to it and we're all going to distance on it which obviously in this kind of environment is a little bit of an outlier when you're investing new dollars and thats that explains in part why our free cash flow is tax because we are investing as William said $230 million in Capex in <unk>.
Speaker Change: Rigs in fact that nobody in the industry is doing that and why are we doing that we're doing that because those rigs have five year payout contracts with a six 6% and four year term to it. So its 10 year 10 year term contracts with a full payout and it is not unheard of our opportunity and at the end of the 50 rig build contract.
Anthony Petrello: And why are we doing that? We're doing that because those rigs have, you know, five-year payout contracts with a six- and four-year term to it. So it's 10-year term contracts with a full payout. And it's an unheard-of opportunity. And at the end of the 50 rigs billed contract, you're going to have more than a $500 million incremental need, but that's why we're doing it. So yes, the taxes are free cash flow in the interim, but we think it's worth it. In terms of, so that, you know, that's where we are.
Speaker Change: You have more than a $500 million incremental EBITDA. That's why we're doing it. So you have to taxes, our free cash flow in the in the interim but we think it's worth it in terms of.
Speaker Change: That's where we are I think the other thing is I think.
Anthony Petrello: I think the other thing is that I think, you know, a lot of concern is, you know, what's really happening there in Saudi Arabia. And I wouldn't, I wouldn't perform to have the inside track on what Ramp goes thinking, but I would just make some observations, which are that, obviously, there is some concern there that supply and the global market is high. And I think there's some dissatisfaction with some other member countries what they're doing in terms of allocations. And the second probably more interesting point is that I think the Ramp goes been surprised by the amount of condensate on, on, unconventional.
Speaker Change: A lot of concern is whats really happening there in Saudi Arabia, and I Wouldnt.
Speaker Change: Wouldn't purport to have the inside track of what Aramco is thinking, but I would just make some observations which are that obviously there is some concern there that supply in the global market is high and I think theres. Some dissatisfaction with some other member countries, what theyre doing in terms of allocations and the second probably more interesting point is that I think the ramp goes.
Speaker Change: Surprised by the amount of condensate on an unconventional.
Anthony Petrello: And it's not just unconventional, but overall, yes. In fact, I think I understand that more than almost 800,000 barrels of equivalent per day is now coming from gas, gas drilling. And that's, that's what's driving some of this, this changes. And then the third thing, of course, is there's some, there's some notion that the overall government budget is requiring more funding. And therefore, they're kind of looking to a Ramp go to, you know, ease them through something for at least a short period of time. So that's what that's affecting the environment. But in terms of us, it's business as usual.
Speaker Change: That's just unconventional but overall gas in fact, I think I understand that more than almost 800000 barrels equivalent per day is now coming from gas gas drilling and that's what's driving some of this this changes and then the third thing of course is there is some there's some notion that.
Speaker Change: The overall government budget is requiring more funding and therefore, they're looking to aramco to.
Speaker Change: He has them through something for at least a short period of time, so that's what that's affecting the environment.
Speaker Change: But in terms of us.
Speaker Change: As usual a ramp goes treated partner extremely well were very happy with the response and where they position Dustin.
Anthony Petrello: A ramp goes to its partner extremely well. We're very happy with their response and where they positioned us. And, you know, we think we're well positioned to deal with the environment. And this is the reason why we did the deal.
Speaker Change: We think we're well positioned to deal with this environment.
Speaker Change: And this is the reason why we did the deal.
William Restrepo: So, a couple of comments, I think on that. I mean, the 27 rigs that have been suspended is a little bit misleading because they're expanding and conventional. So they have awarded about 14 rigs and unconventional, and they have also awarded; we have six more rigs ahead for us. So if you add those two numbers, about 20. So the reduction of 27 rigs on land is a little bit misleading. They are cutting more, a little bit more offshore, I would say. And we don't think that the price initial will be an issue for us. Got it.
Speaker Change: A couple of comments I think on that I mean, the 27 rigs.
Speaker Change: Been suspended is a little bit misleading because theyre expanding unconventional so they have awarded about 14 rigs in unconventional.
Speaker Change: And they have also awarded we have six more rigs ahead for us as you add those two numbers is about 20. So so the reduction of 27 rigs on land is a little bit.
Speaker Change: Meaning they are cutting more a little bit more offshore I would say.
Speaker Change: And we don't we don't think that the pricing issue will be an issue for us.
Speaker Change: Got it.
William Restrepo: All really helpful and understood.
Speaker Change: Really helpful and understood.
William Restrepo: Maybe just, you know, your comment on no change in the cadence of the Sinod new bulb program. You guys had the notes in the press release about how the Sinod rig supplier had improved its performance. And was reaching manufacturing milestone sooner, and that ultimately you guys expect earlier delivery of rigs going forward. Are we don't understand that, you know, that that might mean a pace faster than I think, you know, you have five slot for next year. Is there potential that the pace can be faster than that, or it's where we had for this year, we have for this year.
Speaker Change: Maybe just.
Speaker Change: Your comment on no change in the cadence of the Newbuild program you guys had the.
Speaker Change: And in the press release about how the Synod rig supplier.
Speaker Change: It improved its performance and was reaching manufacturing milestone sooner and then ultimately you guys.
Speaker Change: In fact earlier delivery of rigs going forward are.
Speaker Change: Or we don't understand it.
Speaker Change: That that that might mean, a pace faster than I think.
Speaker Change: Five slot them for next year.
Speaker Change: Is there a potential that the banks can be faster than that or its whereas we had for this year. We have for this year.
William Restrepo: Now they're getting, they're getting to the correct pace now, which is five per year. We don't expect that to increase from that. Understood.
Speaker Change: And now they're getting they're getting to that to the to the correct base now which.
Speaker Change: Which is by per year, we don't expect that to increase from that.
Speaker Change: Right.
Speaker Change: Understood and then just one quick one I think I'm fairly sure that this is pretty much out of nabors control, but any idea of when you might receive the order for the fourth friendships and on new builds.
William Restrepo: And just one quick one.
William Restrepo: I think I'm fairly sure that this is pretty much out of neighbors' control, but any idea when you might receive the order for the fourth transcript Sinod new builds. Thanks. 2025 is all I can say. Fair enough. All right. Thanks a lot.
Speaker Change: <unk>.
Speaker Change: 2025 is all I can say.
Speaker Change: Fair enough alright, thanks, a lot I'll turn it back.
Operator: I'll turn it back.
Keith Mackey: And our next question comes from Keith Mackey with RBC Capital Markets. Please go ahead.
Speaker Change: And our next question comes from Keith Mackey with RBC capital markets. Please go ahead.
Keith Mackey: Hi. Good morning. Just wanted to start out.
Keith Mackey: Hi, Good morning, just wanted to start out good morning.
William Restrepo: Good morning. Just wanted to start out on the international rig margins. Certainly did did very well this quarter with the seven hitting the $17,000 mark. As you think about folding in some of these new San Ed rigs, some of these new Argentina rigs with the heavy NDS component and the removal of some of the lower margin rigs, you have a suspended in Saudi.
Keith Mackey: I just wanted to start out on the international rig margins certainly did did very well this quarter with the seven hitting the $17000 Mark.
Keith Mackey: As you think about folding in some of these new standard rigs some of these new Argentina rigs with a heavy NDS component.
And the removal of some of the lower margin rigs you you have a.
Keith Mackey: Suspended in.
Speaker Change: Saudi can you just talk a little bit about how we should be thinking about daily rig margins through 2025 with all of that as context.
William Restrepo: Can you just talk a little bit about how we should be thinking about daily rig margins through 2025 with all of that as context. So, so to be totally honest with you, I was surprised this quarter by how well international did. I mean, I did say it's ahead of schedule because we expected to see at 17,000 in the fourth quarter based on the mix of the rigs coming in and some of the things we've been doing to improve our performance. But we did have some excellent performance in a couple of geographies that actually can move the needle, and that's what happened in the third quarter.
Speaker Change: So it could be totally honest with you I was surprised this quarter by how well international deal I mean, I did say it's ahead of schedule because we expect it to key at 17000 in the fourth quarter.
Speaker Change: Based on the mix of the rigs coming in and some of the things we've been doing to improve our performance.
Speaker Change: But we did have some excellent performance in a couple of geographies that actually can move the needle and that's what happened in there in the third quarter. So.
William Restrepo: So we think the mix is a little bit better in the fourth now. And we should, if we just did the same performance in the third quarter in the fourth as we did in the third in terms of operations, we would expect the higher than 17,000, which is the guidance. But you know, these things tend to average out. So I don't think will will will be as excellent as we were in the third quarter in those particular geographies number one. And number two, we do have three rigs that are coming in, and that does create a little bit of uncertainty in terms of up time and some of the costs that we have to incur, so.
Speaker Change: So we think the mix is a little bit better in the fourth now and we should if we just did the same performance in the third quarter in the fourth as we did in the third in terms of operations, we would expect a higher than 17000, which is the guidance, but you know these things tend to average out. So I don't think will will will be us.
Speaker Change: Excellent as we were in the third quarter in those particular geographies number one.
Speaker Change: And number two we do have three rigs that are coming in and.
Speaker Change: And that does create a little bit of uncertainty in terms of uptime and some other costs that we have to incur so so you know being a little bit cautious we put 17000 for the fourth quarter, but we do think that going forward into the into 2025, as we add more sand and rigs.
William Restrepo: So, you know, being a little bit cautious, we put 17,000 for the fourth quarter. But we do think that going forward into the into 2025, as we add more Senate rigs and, you know, hopefully get some more wins internationally, you know, that it's entirely possible that we could get higher margins than the 17,000. and we haven't finalized the budget, but that's something we'll be looking at for next year. Got it.
Speaker Change: And.
Speaker Change: You know hopefully get some more wins internationally you know that.
It's entirely possible that we could get higher.
Speaker Change: Higher margins than the 17000 men.
Speaker Change: You know, we havent finalized the budget.
Speaker Change: But that's something we'll be looking at for next year.
Speaker Change: Got it no that's helpful and you gave us some very good color on the rig market in Saudi Arabia curious if you could just.
William Restrepo: No, that's helpful. And you gave us some very good color on the rig market in Saudi Arabia. Curious if you could just give us a little bit more commentary on the general supply-demand balance you're seeing internationally in the various regions.
Speaker Change: Give us a little bit more commentary on the general supply demand balance youre seeing internationally.
Speaker Change: In the various regions I know you mentioned, you're still bullish on international but can you maybe just talk about the main geographic regions what.
William Restrepo: I know you mentioned you're still bullish international, but can you maybe just talk about the main geographic regions, what the supply-demand balance looks and looks like, and maybe within the context being versus the US lower 48, which is kind of a flat-ish market. How are the international markets in supply and demand versus the US lower 48, and how do you see that playing out through the next couple of quarters? Well, topically looking by region, I think when I talk about the 40, we see opportunity spread as follows: in Latin America, about 15 spread between Columbia, Argentina, Mexico.
What the supply demand balance looks.
Looks like and maybe within the with the.
Speaker Change: The context being versus the <unk>.
Speaker Change: U S lower 48, which is kind of a flattish market like how the international markets and supply and demand versus the versus the U S. Lower 48, and how do you see that playing out through through the next couple of quarters.
Speaker Change: Oh topically looking by region I think when I talk about the $40.
Speaker Change: We see opportunity to spread as follows in Latin America about 15 spread between Columbia, Argentina and Mexico.
William Restrepo: The markets there, the rigs are particularly in Columbia and Argentina. A lot of those rigs don't really exist in a usable form. So that does tend to drive pricing higher because the operator specifications, which is a good thing, I think, for us in those markets. In MENA, away from Saudi, you have several countries: Oman, Algeria, UAE, for example, and there are rigs on the ground. But again, I would say maybe half of them maybe can go to work, but a lot of them still require extra capital as well. I think we're in an era today where most things go to work. We're going to need capital, and therefore it's going to drive pricing. It doesn't matter who the operator is, or who the contractor is, and I think that's the environment we're getting to an international.
Speaker Change: The market there.
Speaker Change: Particularly in Colombia and Argentina.
Speaker Change: A lot of those rigs are don't really exist in in a usable form so that does tend to drive pricing higher because the operator specifications, which is a good thing I think for us in those markets.
Speaker Change: In Mena away from Saudi.
Speaker Change: You have several countries.
Oman, Algeria UAE for example.
Speaker Change: And.
Speaker Change: There there are there are rigs on the ground.
Speaker Change: But again I would say maybe.
Speaker Change: Half of them, maybe you can go to work, but a lot of them still require extra capital as well I think we are in the ear with today, where most things to go to work you're going to need capital and therefore, it's going to drive pricing doesn't matter, who the operator is who the contractor is and I think that's the environment, we're getting to an international in Asia.
William Restrepo: In Asia, there's a bit between various Asian countries that we see in other five or six opportunities right now as well. So it's a pretty diverse set of opportunities, and right now, we're obviously only going to cherry-pick the ones that we think are the most attractive. And given our asset base, we're trying to optimize those assets to the opportunity to make sure we minimize the capital and maximize the return and try to provide the customer with a fit-for-purpose solution. But that's the market we're in; that's why we're feeling so good about it, because we think with that number of opportunities with our existing capital, we can do that kind of optimization.
Speaker Change: <unk>.
Various Asian company countries that we see another five or six opportunities right now as well so it's pretty diverse set of opportunities and right now.
Speaker Change: Well, obviously are only going to cherry pick the ones that we think are the most attractive and given our asset base, we're trying to optimize those assets to the opportunity to make sure we minimize the capital and maximize the return and try to provide the customer with a fit for purpose solution that but that's the market. We're in that's why we're feeling so good about it because we think about that number of opportunities.
Speaker Change: Our existing capital, we can do that kind of optimization.
William Restrepo: So 15 in Meena, what Tony mentioned, so 15 Meena, 14 Latin America, and 16 Asia, roughly right. Thank you, Meena. Or 19 Meena, sorry. Thank you, Meena; 15 Latin America and 16 Asia. Got it.
Speaker Change: So 15 in Mena.
Speaker Change: As Tony mentioned, so 50, Mina 14, Latin America and six in Asia.
Speaker Change: Right.
Speaker Change: Thank you. Thank you mean, our 19 million authority ranking mean F 15, Latin America and six in Asia.
Speaker Change: Got it.
Speaker Change: Got it Okay. That's helpful and maybe just one more.
William Restrepo: Okay. Now it's helpful. And maybe just one more.
William Restrepo: If we think about the capital for 2025, I'm sure it's early to talk about it, but maybe can you just talk a little bit about the pieces of the budget. And do you see those pieces adding up to something meaningfully different than what you'd expect to spend in 2024, which is at 600 million. Number. Well, next year, we're going to deploy five rigs in Saudi Arabia versus four this year. So just that is going to be a significant increase year and year, right? The good thing is it's within the Sun of Ambulance, so it doesn't really affect our cash flow outside Sunnet.
Speaker Change: We think about the capital for 2025 I'm sure. It's early to talk about but.
Speaker Change: Maybe can you just talk a little bit about the pieces.
Speaker Change: The budget and do you see those pieces, adding up to something meaningfully different than what you would expect in.
Speaker Change: To spend in 2024, four which is at 600 million number.
Speaker Change: While next year, we're going to deploy five rigs in Saudi Arabia versus four this year. So just that it's going to be a significant increase.
Speaker Change: Year on year right.
Speaker Change: The good thing is within the sign of envelope. So it doesn't really affect our cash flow outside China.
William Restrepo: So that part, although you will see higher headline Capix, is not outside Sunnet and that's the cash. Outside Sunnet is the cash we can easily use to pay down our debt. So, but you'll see an increase there. We also have a higher number of rigs across the globe next year than this year, so the main is Capix should be somewhat up. I mean, I think maybe a 10% increase, approximately. We don't have the same number of opportunities that we attack this year in the sense of how many we think we will try to get next year.
Speaker Change: So so that part although you will see a higher headline capex is not outside China and then that's the cash I'll take advantage of the cash we can easily use to pay down our debt. So.
Speaker Change: So, but you will see an increase there you will also we will also have a higher number of rigs across the globe next year than this year. So the maintenance capex should be somewhat up I mean, I think maybe a 10% increase.
Speaker Change: Approximately.
Speaker Change: We don't have the same number of.
Speaker Change: Opportunities that we attacked this year in the sense of how many we think we will try to get next year.
William Restrepo: So potentially, the international capix will not be as high.
Speaker Change: So potentially the international Capex for new contracts will not be as high.
William Restrepo: So to put all that in the grinder, and we haven't finalized the budget, so I'll give you take that with a grain of salt. But I think the Capix will be higher next year. That's all I can say now.
Speaker Change: To put all of that in our in the grinder and we havent finalized the budget. So I gave you take that with agreement itself, but I think the capex will be higher next year, that's all I can say.
Speaker Change: Got it thank you very much.
William Restrepo: Thank you very much.
Operator: Concludes are a question and answer session.
Speaker Change: Concludes our question and answer session I would like to turn the conference back over to William Conroy for any closing remarks. Thank.
William Conroy: I would like to turn the conference back over to William Conway for any closing remarks.
William Conroy: Thank you very much, everyone, for joining us today. If you would care to follow up, please just reach out to us.
William Conroy: Thank you very much everyone for joining us today, if you would care to follow ups. Please just reach out to us.
Operator: And why, with that, we'll conclude the call here.
William Conroy: And why it with that we'll conclude the call here.
Operator: But the conference is now concluded. Thank you for attending today's presentation.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: May now disconnect.