Nabors Industries Signals Cautious Optimism in Earnings Call

Nabors Industries Ltd. ((NBR)) has held its Q1 earnings call. Read on for the main highlights of the call.

Nabors Industries’ latest earnings call struck a cautiously optimistic tone, blending solid operational gains with clear acknowledgment of regional and segment-specific headwinds. Management highlighted growing momentum in the Lower 48, expanding international activity and SANAD newbuilds, and strong cash generation and balance sheet repair, even as Middle East disruptions and softer margins weighed on near-term results.

Consolidated Revenue Holds Steady Amid Mixed Margins

Nabors reported Q1 consolidated revenue of $784 million, reflecting a stable top line despite operational disruptions and weaker performance in certain segments. However, consolidated adjusted EBITDA margin slipped to 26.1%, down 164 basis points sequentially, underscoring that profitability is lagging revenue as the company navigates transition and regional challenges.

Lower 48 Rig Count and Revenue Climb

Activity in the Lower 48 continued to recover, with the working rig count rising to 66 at quarter end after adding four rigs in Q1 and eight since November 2025. Segment revenue increased 5.9% sequentially to $192 million as the average rig count climbed to 65.3, and Nabors expects this U.S. land growth to remain a key driver of incremental earnings.

International Rig Growth and SANAD Expansion

International drilling remained a strategic growth engine, with the rig count up 16% since 2023 despite near-term margin pressure. SANAD deployed its 15th newbuild rig in Q1 and plans four more in 2026 and a 20th rig in early 2027, while discussions to extend the program toward 25 rigs point to long-term EBITDA growth, with each tranche expected to generate over $60 million annually.

PaceX Ultra Underscores Premium Pricing Power

The company emphasized strong performance from its PaceX Ultra rigs, which generate daily revenue well above $40,000 including Drilling Solutions content. With one unit currently working, agreements to deploy two more this year and active discussions on further upgrades signal rising demand for high-spec rigs and support management’s confidence in improving pricing over the next several years.

Drilling Solutions Delivers Exceptional Cash Conversion

Nabors Drilling Solutions posted Q1 revenue of $106 million, flat sequentially, but turned in EBITDA of $39 million and a record conversion of about 94% of EBITDA to free cash flow. This high cash conversion and low capital intensity make the segment a key contributor to the company’s funding flexibility and overall free cash flow profile.

Free Cash Flow and Working Capital Outperform Expectations

The company consumed $48 million of consolidated adjusted free cash flow in Q1, yet this result was more than $35 million better than guidance and nearly breakeven outside SANAD. Management credited better-than-expected working capital progression and capital expenditures that came in below plan, highlighting improving financial discipline and execution.

Debt Reduction Strengthens Capital Structure

Nabors continued to reshape its balance sheet by redeeming the remaining $379 million of senior guaranteed notes due 2028 during the quarter. This move pushes the nearest material maturity out to June 2029, leaving a manageable $250 million due then and reinforcing management’s long-term net leverage target of roughly 1.0 times.

International Drilling Margins Under Pressure

International Drilling revenue came in at $419 million, down 1% sequentially, while segment EBITDA fell 7.6% to $121 million and margins compressed to 28.9%. The average daily gross margin of $16,880 missed guidance, reflecting SANAD oil-to-gas rig transitions, holiday-related labor effects, and regional disruptions that weighed on profitability.

Middle East Conflict and Regional Disruptions Weigh on Results

Management quantified about $3.0–$3.5 million in adverse EBITDA impact from Middle East logistics, supply chain, and crew-rotation friction during Q1 and expects $6–$8 million of drag in Q2. Additional headwinds included ongoing activity disruptions in Colombia, currency pressure from a stronger Colombian peso, and idle rigs in Venezuela, all contributing to international margin softness.

Rig Technologies and Offshore Segments Soften

Rig Technologies revenue declined to $27 million, down $11 million sequentially, with EBITDA dropping to roughly $5 million and missing guidance partly due to parts-delivery delays tied to the Middle East. Alaska and U.S. offshore EBITDA also fell to $17 million, down $9 million sequentially, as changes in work scope and mix added to the consolidated margin challenges.

Consolidated Free Cash Flow Still Negative but Improving

Despite beating internal expectations, Nabors’ consolidated adjusted free cash flow remained negative in Q1, with SANAD a significant driver of cash consumption as newbuild investments continue. Even so, the nearly breakeven free cash flow performance outside SANAD and the trajectory of working capital improvement are important signals that overall cash generation is trending in the right direction.

Guidance Points to Improving Margins and Activity

For Q2, Nabors guided to a modest $6–$8 million EBITDA drag from Middle East inefficiencies but expects international average daily gross margin to rise to $17,400–$17,500 on 93–95 rigs, and Lower 48 average rigs of 67–68 with daily adjusted gross margin around $13,300. Management kept full-year capital spending guidance intact while targeting roughly breakeven consolidated adjusted free cash flow in Q2 and reaffirming SANAD’s multiyear newbuild program as a core growth and earnings lever.

Nabors’ earnings call framed a company leaning into growth opportunities while wrestling with near-term operational frictions and softer margins. Investors heard a narrative of improving U.S. land activity, powerful long-term economics from SANAD and high-spec rigs, and active balance-sheet repair, but also a reminder that geopolitical, logistical, and regional risks remain a tangible drag on quarterly performance.