Nabors Industries Ltd.
Crown House Second Floor
4 Par-La-Ville Road
Hamilton, Bermuda HMO8
April 26, 2022
Via EDGAR
Ms. Wei Lu
Mr. Ethan Horowitz
Division of Corporation Finance
Securities and Exchange Commission
100 F Street N.E.
Washington, D.C. 20549
Re: | Nabors Industries Ltd. |
Form 10-K for the Fiscal Year Ended December 31, 2021 Filed February 18, 2022 and Form 8-K filed February 8, 2022 File No. 001-32657 |
Dear Ms. Lu and Mr. Horowitz:
We confirm receipt by Nabors Industries Ltd. (the “Company”), a Bermuda exempted company, of the comment letter dated April 12, 2022 of the Commission with respect to the above-referenced Form 10-K for the Fiscal Year Ended December 31, 2021 and Form 8-K filed February 8, 2022 (the “Letter”).
To assist in the Staff’s review of the Company’s responses, we precede each response with the text (in bold type) of the comment as stated in your letter. The Company believes that it has replied to your comments in full.
Form 8-K filed February 8, 2022
Exhibit 99.1
Segment Reporting, page 3
1. | We note your response to prior comment 2. As Daily adjusted gross margin appears to be a non-GAAP measure presented on a segment basis, tell us how you considered reconciling it to the measure used by management to evaluate segment performance, Adjusted operating income (loss), as the most directly comparable GAAP-basis measure. |
Thank you for your comment. When responding to your previous letter dated March 24, 2022, we considered whether to reconcile Adjusted Gross Margin by segment to Operating revenues or to Adjusted operating income (loss). We elected to reconcile it to Operating revenues by segment, as it seemed to be the most direct way to calculate the number from line items used in our income statement. However, because Adjusted operating income (loss) by segment is the measure used by management to evaluate segment performance, we will reconcile Adjusted Gross Margin by segment to Adjusted operating income (loss) by segment. Please see Exhibit 1 for an example of this reconciliation table.
Reconciliation of Non-GAAP Financial Measures to Income (Loss) from Continuing Operations Before Income Taxes, page 5
2. | We note the proposed revisions provided in your response to prior comment 3. It appears that Adjusted EBITDA presented on a consolidated basis should be reconciled to GAAP basis net income (loss) as presented in your Statement of Comprehensive Income (Loss) and Adjusted gross margin presented on a consolidated basis should be reconciled to a fully burdened, GAAP-basis measure of gross margin. Please revise your disclosure to comply with Item 10(e)(1)(i)(B) of Regulation S-K. Also, see question 103.02 of the Compliance & Disclosure Interpretations regarding Non-GAAP Financial Measures. This comment also applies to your response to prior comment 5. |
Thank you for your comment. We will make the requested revisions in future filings. Please see Exhibit 2 for examples of these reconciliation tables.
Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities, page 7
3. | We note your proposed revision in response to prior comment 4. Please tell us if your reference to cash flow available for paying down debt is consistent with your mandatory debt service requirements and whether you consider the payment of dividends to shareholders to be a non-discretionary expenditure. |
Thank you for your comment. Our reference to “cash flow available for paying down debt” is cash flow that is available to pay down the principal amount of our debt after we have made all mandatory debt service payments, so we believe it is consistent. We do not consider the payment of dividends to shareholders to be a non-discretionary expenditure.
We acknowledge that we are responsible for the adequacy and accuracy of the disclosures in each of our filings.
* * *
In the event the Staff has additional questions or comments, please contact the undersigned at (281) 775-8166, or you may contact Jim Ball at 212-530-5515 of Milbank LLP.
Sincerely yours, | |
/s/ William Restrepo | |
William Restrepo | |
Chief Financial Officer | |
Nabors Corporate Services, Inc. | |
cc: | Nabors Industries Ltd.: | |
Anthony G. Petrello | ||
R. Clark Wood | ||
Milbank LLP: | ||
James H. Ball, Jr. |
Exhibit 1
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF SEGMENTS' ADJUSTED GROSS MARGIN TO SEGMENTS' ADJUSTED OPERATING INCOME
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | ||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2021 | 2020 | |||||||||||||||
Lower 48 - U.S. Drilling | ||||||||||||||||||||
Adjusted operating income | $ | (25,474 | ) | $ | (31,787 | ) | $ | (30,783 | ) | $ | (119,000 | ) | $ | (133,672 | ) | |||||
Plus: General and administrative expenses | 4,610 | 4,169 | 4,606 | 17,892 | 17,186 | |||||||||||||||
Plus: Research and engineering | 1,064 | 579 | 1,296 | 3,736 | 2,515 | |||||||||||||||
GAAP Gross Margin | (19,800 | ) | (27,039 | ) | (24,881 | ) | (97,372 | ) | (113,971 | ) | ||||||||||
Plus: Depreciation and amortization | 68,994 | 74,123 | 68,603 | 273,636 | 337,758 | |||||||||||||||
Adjusted gross margin | $ | 49,194 | $ | 47,084 | $ | 43,722 | $ | 176,264 | $ | 223,787 | ||||||||||
Other - U.S. Drilling | ||||||||||||||||||||
Adjusted operating income | $ | 12,887 | $ | 5,572 | $ | 11,083 | $ | 42,508 | $ | 37,496 | ||||||||||
Plus: General and administrative expenses | 515 | 714 | 531 | 2,119 | 2,533 | |||||||||||||||
Plus: Research and engineering | 105 | 73 | 120 | 409 | 318 | |||||||||||||||
GAAP Gross Margin | 13,507 | 6,359 | 11,734 | 45,036 | 40,347 | |||||||||||||||
Plus: Depreciation and amortization | 12,842 | 14,254 | 13,229 | 52,807 | 60,568 | |||||||||||||||
Adjusted gross margin | $ | 26,349 | $ | 20,613 | $ | 24,963 | $ | 97,843 | $ | 100,915 | ||||||||||
U.S. Drilling | ||||||||||||||||||||
Adjusted operating income | $ | (12,587 | ) | $ | (26,215 | ) | $ | (19,700 | ) | $ | (76,492 | ) | $ | (96,176 | ) | |||||
Plus: General and administrative expenses | 5,125 | 4,883 | 5,137 | 20,011 | 19,719 | |||||||||||||||
Plus: Research and engineering | 1,169 | 652 | 1,416 | 4,145 | 2,833 | |||||||||||||||
GAAP Gross Margin | (6,293 | ) | (20,680 | ) | (13,147 | ) | (52,336 | ) | (73,624 | ) | ||||||||||
Plus: Depreciation and amortization | 81,836 | 88,377 | 81,832 | 326,443 | 398,326 | |||||||||||||||
Adjusted gross margin | $ | 75,543 | $ | 67,697 | $ | 68,685 | $ | 274,107 | $ | 324,702 | ||||||||||
Canada Drilling | ||||||||||||||||||||
Adjusted operating income | $ | 223 | $ | (2,501 | ) | $ | 1,371 | $ | 2,893 | $ | (11,766 | ) | ||||||||
Plus: General and administrative expenses | 174 | 601 | 493 | 1,711 | 2,729 | |||||||||||||||
Plus: Research and engineering | - | 35 | 25 | 115 | 112 | |||||||||||||||
GAAP Gross Margin | 397 | (1,865 | ) | 1,889 | 4,719 | (8,925 | ) | |||||||||||||
Plus: Depreciation and amortization | - | 6,002 | 236 | 11,604 | 24,784 | |||||||||||||||
Adjusted gross margin | $ | 397 | $ | 4,137 | $ | 2,125 | $ | 16,323 | $ | 15,859 | ||||||||||
International Drilling | ||||||||||||||||||||
Adjusted operating income | $ | (5,749 | ) | $ | (35,462 | ) | $ | (7,297 | ) | $ | (40,117 | ) | $ | (56,205 | ) | |||||
Plus: General and administrative expenses | 12,057 | 11,891 | 10,909 | 44,995 | 46,093 | |||||||||||||||
Plus: Research and engineering | 1,359 | 1,300 | 1,520 | 5,560 | 5,444 | |||||||||||||||
GAAP Gross Margin | 7,667 | (22,271 | ) | 5,132 | 10,438 | (4,668 | ) | |||||||||||||
Plus: Depreciation and amortization | 78,917 | 99,952 | 83,508 | 323,429 | 377,599 | |||||||||||||||
Adjusted gross margin | $ | 86,584 | $ | 77,681 | $ | 88,640 | $ | 333,867 | $ | 372,931 |
Exhibit 2
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS)
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | ||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2021 | 2020 | |||||||||||||||
Net income (loss) | $ | (109,263 | ) | $ | (103,879 | ) | $ | (115,722 | ) | $ | (543,690 | ) | $ | (762,846 | ) | |||||
(Income) loss from discontinued operations, net of tax | (13 | ) | (55 | ) | 20 | (20 | ) | (7 | ) | |||||||||||
Income (loss) from continuing operations, net of tax | (109,276 | ) | (103,934 | ) | (115,702 | ) | (543,710 | ) | (762,853 | ) | ||||||||||
Income tax expense (benefit) | 18,393 | 38,842 | 2,784 | 55,621 | 57,286 | |||||||||||||||
Income (loss) from continuing operations before income taxes | (90,883 | ) | (65,092 | ) | (112,918 | ) | (488,089 | ) | (705,567 | ) | ||||||||||
Investment (income) loss | (156 | ) | (3,342 | ) | (200 | ) | (1,557 | ) | (1,438 | ) | ||||||||||
Interest expense | 44,570 | 47,943 | 42,217 | 171,476 | 206,274 | |||||||||||||||
Impairments and other charges | 1,312 | 71,328 | 3,068 | 66,731 | 410,631 | |||||||||||||||
Other, net | 8,858 | (151,377 | ) | 19,690 | 39,998 | (199,707 | ) | |||||||||||||
Adjusted operating income (loss) | (36,299 | ) | (100,540 | ) | (48,143 | ) | (211,441 | ) | (289,807 | ) | ||||||||||
Depreciation and amortization | 167,955 | 208,654 | 173,375 | 693,381 | 853,699 | |||||||||||||||
Adjusted EBITDA | $ | 131,656 | $ | 108,114 | $ | 125,232 | $ | 481,940 | $ | 563,892 |
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED GROSS MARGIN TO GAAP GROSS MARGIN
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | ||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2021 | 2020 | |||||||||||||||
Operating revenues | $ | 543,539 | $ | 443,396 | $ | 524,165 | $ | 2,017,548 | $ | 2,134,043 | ||||||||||
Less: Direct operating costs | (347,238 | ) | (274,278 | ) | (336,538 | ) | (1,286,896 | ) | (1,333,073 | ) | ||||||||||
Less: Depreciation and amortization | (167,955 | ) | (208,654 | ) | (173,375 | ) | (693,381 | ) | (853,699 | ) | ||||||||||
GAAP Gross Margin | 28,346 | (39,536 | ) | 14,252 | 37,270 | (52,728 | ) | |||||||||||||
Plus: Depreciation and amortization | 167,955 | 208,654 | 173,375 | 693,381 | 853,699 | |||||||||||||||
Adjusted gross margin | $ | 196,301 | $ | 169,118 | $ | 187,627 | $ | 730,652 | $ | 800,971 |