merrill lynch global energy conference november...
TRANSCRIPT
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NABORS COMPETITIVE STRENGTHS
Strong financial position
Broad global infrastructure
Extensive global experience and expertise
Large and diverse asset base with significant available capacity
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Balance Sheet Data as of September 30, 2004
A CONSERVATIVE AND FLEXIBLE FINANCIAL POSITION
S&P 500, OSXIndexesA-Standard & PoorsA3Moody’s Rating (1)164Weighted Average Shares Outstanding
23%Net Debt to Capitalization42%Total Debt to Total Capitalization2,772Stockholders’ Equity2,003Total Debt5,618Total Assets3,190Property, Plant and Equipment, Net1,117Working Capital480Accounts Receivable
1,194Cash & Marketable SecuritiesActual
($ in millions)
(1) Some debt issues are unrated
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A MORE BALANCED BUSINESS
Improved balance in our operating income stream– Strong growth in Canada– Consistent growth internationally– Growth less reliant on US land business– US land pricing and volume momentum is here– Good outlook in US Gulf of Mexico
Lower “Below the Line” cost– Reduced cost of capital– Lower diluted share count– Improved tax position
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FLEET STATUS AS OF OCTOBER 29, 2004
8102457Canada
88424947588Total W.O./Well Servicing216465165Canada66820342423US Lower 48 (2)
W.O./Well Servicing628.5120139.5369Total Drilling20.52216.5Int’l Offshore (1)951623.555.5Int’l Land (1)
International
4002812GOM Offshore37210052220US 48 Drilling202108Alaska
North AmericaTotalInventoryReady-to-RunWorkingDrilling
(1) Represents Nabors’ Net Interest in J.V. Rigs in Saudi @ 50%, operating rig count includes those leased from GOM Offshore(2) Decommissioning 75 rigs in 3Q and 4Q 2004 with $1.8 Million net book value
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STRONG FUNDAMENTALS UNDERPIN POSITIVE OUTLOOK
Supply challenges point to a more orderly and sustainable cycle
North American gas decline rates imply 20+ BCFPD/year
Timing of the supply impact of stranded and imported gas
Additional drilling is required in US & Canadian Basins
Longer term, LNG will ultimately become the marginal supply
Global oil supply challenges and increasing demand
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GLOBAL LAND DRILLING OUTLOOK
North America:
Effectively at full capacity utilization of available rigs
Rates & Margins at the inflection point
Demand appears to be continuing at a “Goldilocks” pace
This cycle will likely last throughout the decade and beyond with more moderate volatility
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NABORS HAS GAINED WITH INCREASED HORIZONTAL DRILLING AND A ROBUST MARKET IN THE ROCKIES
600650700750800850900950
100010501100
1/3/031 /24 /032/14 /03
3 /7/033/28 /034 /18 /03
5 /9/035 /30 /036/20 /037 /11 /03
8 /1/038 /22 /039 /12 /0310/3 /03
10/24/0311/14/03
12/5 /0312/26/03
1 /16 /042 /6/042 /27/043 /19 /04
4 /9/044 /30 /045 /21/046 /11 /04
7 /2/047 /23 /048 /13/04
9 /3/049 /24 /04
10/15/04
90100110120130140150160170180190200210220230
BHI NBR AREA NBR RIGS
Source: Baker Hughes – Excludes N.E. States, California and Alaska
NBR Incremental Share = 34% since 1/3/03
104%112220108NBR
49%3301005675BHI
Increase10/22/041/3/03
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INTERNATIONAL ACTIVITY IS HEATING UP, ESPECIALLY ON LAND, WITH 45-60 INCREMENTAL RIGS OVER NEXT 24 MONTHS
YemenLibyaVenezuelaIndia
Saudi ArabiaEgyptRussiaEcuadorMexicoColombiaOmanAlgeria
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SAUDI ARABIA RIG ACTIVITY INCREASINGNabors adding 10 of the 21 rig expected increase
40%32%45%36%40%33%Market ShareNabors & J.V.
268181688Total (3)844844Joint Venture (2)
18414844Wholly-OwnedNabors
652540442024Rigs Working (1)TotalGasOilTotalGasOil
Est. 2Q 2005May 2004
(1) 31 rigs drilling plus 13 drilling rigs doing re-entry, sidetracks, re-drilling and workovers(2) Nabors has 50% interest in these rigs(3) In addition, Nabors also owns and operates three accommodation jack-ups
Source: BHI Saudi rig count , Nabors
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INCREASED USE OF HORTIZONTAL& MULTILATERAL WELLS
HIGHER SPECIFICATION RIGS YIELD IMPROVED EFFICIENCY
Increased hydraulic horsepower (psi x gpm) to facilitate optimalbit and mud motor performance7,500 psi pump pressure capabilityTop drives facilitate directional orientationOpti-Drill™ automatic driller with proprietary Drill Smart™Algorithms– Continuous analysis of drilling conditions to maximize ROP– Improved directional motor life– Maximize benefit of rotary steerable drilling
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NABORS’ INITIATIVES INRIG EFFECIENCY & INNOVATION
Reducing moving times - drilling days vs. moving days
Upgrading rig capabilities – higher hydraulic horsepowers
Incorporating technology innovations where cost effective
Overall performance improvements in safety and efficiency
Setting new records in drilling days & cost
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LOWER CYCLE TIME PER WELLLess days per well requires shorter moving times
Nabors is cutting 30-70% off move times with simplelow cost initiatives:– 24 hour moves– Better pre-planning and sequencing
• Less dead time• Less cost for cranes and trucking
– More optimal unitization of modules• Modest structural changes to minimize loads• Less labor intensive disconnect/reconnect
– Nabors’ controlled trucking resource
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INCREASED INTEREST IN PAD DRILLINGMultiple wells drilling directionally from sites
in environmentally sensitive areas
Nabors pioneered pad drilling in the 1970’s – 1990’s on the North Slope of AlaskaAdapting new generation “Lift and Roll” skid systems from North Slope applicationsApplications:– McKenzie Delta– Tar Sands– US Rocky Mountains – Various International venues
Advantages:– Faster moves– Smaller environmental impact– Faster field development
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EFFICIENCY EMPHASIS LEADSTO LAND RIG INNOVATION
Building leading edge rigs, utilizing existing components, yields favorable returns
• Fast moving “Commander” class rigs
• 800–2,000 horsepower electric A/C drive
• Four currently working,10 under construction
• PLC (Programmable Logic Controls)
• Modularized skidded rigs for pad drilling
• New A/C coiled tubing/stem drilling rig under construction with term contract
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INCREASED DEEPWATER DEVELOPMENTA NEW DEEPWATER CLASS PLATFORM RIG AT FAVORABLE COSTS
MODS (Modular Offshore Dynamic Series)– A/C drives based on Commander
class drilling rig design– PLC controls provide extra safety
features to protect crews and equipment
The only A/C platform rigs in the Gulf of MexicoCapable of rigging up on conventional platforms, TLPs and Spars
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WORKOVER WELL SERVICINGMORE EMPHASIS ON HARVESTING OIL RESOURCES
Nabors is pushing an old industry forward
New generation 500 HP PLC rigs
Make up torque monitor
Rig Instrumentation– Monitor on going operations in real-time via internet.– Built in safety alerts and hazardous operations monitoring
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A MORE BALANCED BUSINESSHigher earnings at less U.S. land drilling activity
First Call Estimates
$4,750$3,850$2,700$4,840GM/Rig/Day
US Lower 48 Metrics230230197210Average Rig Years
$550220
110115$110
$2.71
Mean2005
$110$92$30Canada
$37092
9888
$1.83
Mean2004
$625$588Total290286US Lower 48 Drilling
110211Other US Businesses11558International
$3.00$2.24Earnings Per Share
High2005
Actual2001
Operating Unit EBITBefore Corp & Consolidation