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    NBR
    Earnings call· Jun 2026(Q2 FY26)

    NABORS INDUSTRIES Q2 FY26 earnings call NBR

    Jul 29, 2026 Source

    Executive summary

    Nabors Q2 FY26 — Strong Operational Execution and Exceeded Guidance Across All Segments

    Nabors delivered a strong second quarter, outperforming expectations across all segments driven by disciplined execution and robust international performance. The company is capitalizing on improving Lower 48 market conditions with higher utilization and pricing momentum, while its technology portfolio increasingly drives earnings and differentiation. Despite some timing-related capital expenditure and free cash flow impacts, Nabors raised its full-year EBITDA guidance, underscoring confidence in its strategic positioning and ability to generate durable shareholder value.

    Highlights

    5

    • Adjusted EBITDA totaled $222 million, exceeding expectations and guidance across all four reporting segments.

    • Lower 48 daily revenue improved by more than $900 sequentially, with leading-edge pricing increasing into the low to mid-$30,000 range.

    • SANAD joint venture placed its 16th newbuild rig into service and returned two previously suspended rigs to work, strengthening its leadership in Saudi Arabia.

    • Drilling Solutions (NDS) EBITDA increased by 3.5% to $40 million, with a 90% free cash flow conversion rate, driven by 11% growth on Nabors rigs and 12% on third-party rigs in Lower 48.

    • Full-year 2026 EBITDA guidance raised to $920 million to $930 million, above prior expectations.

    Concerns

    4

    • Capital expenditures for Q2 were $158 million, below guidance due to timing of SANAD newbuild milestones, which shifted some construction into early 2027.

    • Adjusted free cash flow for Q2 was $12 million, modestly above guidance but impacted by slower collections in Mexico and the United States.

    • Q3 adjusted free cash flow is expected to be a use of approximately $40 million, including $65 million cash consumption by SANAD.

    • Lower 48 daily adjusted gross margin is expected to remain approximately flat in Q3 at $13,800 due to fewer near-term renewal opportunities limiting additional pricing gains.

    Guidance & targets

    20
    CategoryTargetConfidence
    Full-year Adjusted EBITDA
    $920M-$930M
    high materiality
    High
    Full-year Adjusted Free Cash Flow
    $20M-$30M
    high materiality
    High
    Full-year Consolidated Capital Expenditures
    $710M-$730M
    medium materiality
    High
    Full-year SANAD Newbuild Capital Expenditures
    $325M-$335M
    medium materiality
    High
    Q3 International Drilling Average Rig Count
    94-96
    medium materiality
    High
    Q3 International Drilling Average Daily Gross Margin
    $18,100-$18,400
    medium materiality
    High
    Q3 Lower 48 Average Working Rig Count
    ~73
    medium materiality
    High
    Q3 Lower 48 Daily Adjusted Gross Margin
    $13,800
    medium materiality
    Medium
    Q3 Alaska and U.S. Offshore Combined EBITDA
    ~$11M
    low materiality
    High
    Q3 Drilling Solutions EBITDA
    ~$42M
    medium materiality
    High
    Q3 Rig Technologies EBITDA
    $5M-$6M
    low materiality
    High
    Q3 Consolidated EBITDA Margin
    increase by ~100 bps
    medium materiality
    High
    Q3 Capital Expenditures
    $245M-$255M
    medium materiality
    High
    Q3 SANAD Newbuild Capital Expenditures
    ~$130M
    medium materiality
    High
    Q3 Consolidated Adjusted Free Cash Flow
    use of ~$40M
    medium materiality
    High
    Q3 SANAD Cash Consumption
    ~$65M
    medium materiality
    High
    Gross Debt Reduction
    at least $100M
    high materiality
    High
    Net Leverage Target
    ~1 turn
    high materiality
    High
    Lower 48 Leading-edge Daily Revenue
    reach or exceed mid-$30,000s
    high materiality
    High
    Lower 48 Rig Additions from Operator Survey
    11 rigs
    medium materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    International Drilling
    Revenue increased by $13 million or 3.1%. EBITDA increased by $9 million or 7.6%. EBITDA margin expanded 127 basis points to 30.2% with a robust 71% fall-through. Average rig count increased from 92.6 to 93.4. Average daily rig margin increased by $654 sequentially. Growth was driven by SANAD newbuilds and suspended rigs returning to service, partially offset by contract roll-off of two lower-margin rigs in Algeria and India.
    Average Rig Count: 93.4Average Daily Rig Margin: $17,534
    		$432M—3.1%$131M EBITDA (30.2% margin)
    U.S. Drilling
    Revenue increased by $11 million or 4.7%. EBITDA increased by $6 million or 6.8%. EBITDA margin expanded 75 basis points to 37.3% with a solid 53% fall-through. Results exceeded implied guidance, driven by Lower 48 performance.
    		$252M—4.7%$94M EBITDA (37.3% margin)
    U.S. Drilling (Lower 48)
    Revenue increased by $15 million or 7.8%. Average working rig count increased by 2.5 to 67.8, exiting Q2 with 71 rigs and currently at 73 rigs. Average daily revenue increased by $902. Average daily margin increased by $607. Added five rigs across major basins. Nearly 70% of working fleet serves publicly traded operators. Over 45% of rigs had at least six months of remaining duration by quarter end, expected to be ~50% in Q3.
    Average Working Rig Count: 67.8Average Daily Revenue: $33,555Average Daily Margin: $13,784
    		$207M—7.8%—
    U.S. Drilling (Alaska and Offshore)
    Combined revenue was $46 million and EBITDA was $15 million, resulting in an EBITDA margin of 33.5%, in line with guidance.
    		$46M——$15M EBITDA (33.5% margin)
    Drilling Solutions (NDS)
    Revenue increased by $4 million or 4.2%. EBITDA increased by $1 million or 3.5%. EBITDA margin was 36.2%. EBITDA was 3% above guidance, primarily supported by higher penetration across both Nabors (11% revenue growth) and third-party rigs (12% revenue growth) in the Lower 48. International growth in Saudi Arabia and Argentina was partially offset by lower asset sales. Converted approximately 90% of EBITDA into free cash flow.
    		$111M—4.2%$40M EBITDA (36.2% margin)
    Rig Technologies
    Revenue increased to $37 million, up 37.7%. EBITDA improved to $3.2 million, modestly exceeding guidance. Improvement was driven by higher activity across the portfolio, led by a stronger performance in the Middle East. Introduced its first advanced, fully automated TITAN rig floor wrench into commercial service.
    		$37M—37.7%$3.2M EBITDA

    Operational metrics

    23
    Adjusted EBITDA
    $222Mwell above expectations
    Q2 FY26

    Exceeded the guidance we provided last quarter across all four reporting segments.

    Consolidated Revenue
    $815M+4% sequentially
    Q2 FY26

    Increase of $31 million or 4% sequentially, with growth across every operating segment.

    EBITDA Margin
    27.2%+107 bps sequentially
    Q2 FY26

    EBITDA margin expanded 107 basis points to 27.2% with a very strong 54% fall-through.

    NDS EBITDA to Free Cash Flow Conversion
    90%
    Q2 FY26

    NDS remains a strong cash generator, converting approximately 90% of EBITDA into free cash flow during the quarter.

    Saudi Land Rig Market Operating Rigs
    196up 4 sequentially, up 35 from Q3 2025 low
    current

    The current count still stands 28 rigs below the peak in early 2024.

    SANAD Rigs in Saudi Arabia
    55
    current

    SANAD also returned one previously suspended rig to work. Two of SANAD's three suspended rigs are now back on contract.

    SANAD Market Share
    28%
    current

    With a 28% market share, SANAD is the largest land drilling contractor in Saudi Arabia.

    SANAD Gas Exposure
    nearly 3/4
    current

    Of the industry's land rigs running currently in the Kingdom, approximately 2/3 work in natural gas. SANAD's gas exposure is even greater with nearly 3/4 in gas.

    NDS Market Share (Casing Running)
    #1
    current

    NDS holds the #1 market share in casing running in both countries.

    NDS International EBITDA Contribution
    second and third largest
    current

    These two geographies already rank as the second and third largest international contributors to NDS' EBITDA.

    Argentina Operating Rigs
    13mobilizing another rig to bring total to 14
    current

    Another is earning revenue under an O&M contract. The client base is well diversified. Our fleet currently works for five different operators.

    Argentina Market Share
    30%
    current

    With a 30% market share, Nabors holds the largest position in the country.

    NDS EBITDA Contribution
    46%
    H1 2026

    NDS accounts for approximately 46% of our EBITDA in Argentina in the first half of 2026. This marks the highest contribution of any country in our portfolio.

    International Incremental Rig Opportunities
    more than 40
    future

    Across our existing international footprint, we are tracking opportunities representing more than 40 incremental rigs.

    Baker Hughes Lower 48 Land Rig Count Increase
    31+6% sequentially
    Q2 FY26

    From the end of the first quarter to the end of the second quarter, the Baker Hughes Lower 48 land rig count increased by 31 rigs or 6%.

    Baker Hughes Lower 48 Oil Rig Count Increase
    +8%
    Q2 FY26

    the Baker end-to-end oil rig count increased by 8%.

    Lower 48 Public Operator Customer Mix
    nearly 70%
    Q2 FY26

    By quarter end, nearly 70% of our working Lower 48 fleet serves publicly traded operators.

    Lower 48 Contract Backlog Duration
    more than 45%expected to be approximately 50% in Q3
    Q2 FY26 end

    By quarter end, more than 45% of our rigs in this market had at least six months of remaining duration.

    Lower 48 NDS Revenue Growth (Nabors rigs)
    11%outpacing fleet growth
    Q2 FY26

    On Nabors' own Lower 48 rigs, NDS revenue increased sequentially by 11%.

    Lower 48 NDS Revenue Growth (Third-party rigs)
    12%while third-party average rig count increased only 1%
    Q2 FY26

    While third-party average rig count increased only 1%, NDS revenue grew 12%.

    PACE-X Ultra Rigs Daily Revenue
    meaningfully exceeds $40,000
    current

    fully equipped with the MDS technology suite, including technology offerings, daily revenue meaningfully exceeds $40,000 per rig.

    Gross Debt Reduction Target
    at least $100M
    2026

    We remain committed to reducing gross debt by at least $100 million during 2026.

    Net Leverage Target
    ~1 turn
    long-term

    consistent with our long-term objective of reducing net leverage to approximately one turn.

    Industry KPIs

    5
    MetricValueDetails
    FCF CAPEX leverage$12M (FCF), $158M (CapEx), ~1 turn (Net Debt/Adj EBITDA target)USD (FCF, CapEx), ratio (Leverage)
    Digital recurring revenue—
    Orders bookings by segment—
    Segment adjusted EBITDA margin30.2%%
    Data center new energy revenue capacity—

    Deals & partnerships

    2
    Quaise EnergyFirst commercial application of super hot enhanced geothermal systems

    Began drilling on Quaise Energy project Obsidian in Oregon. This project represents the first commercial application of super hot enhanced geothermal systems. Quaise has a contract with Google for 250 megawatts, with the first well for a 50-megawatt installment.

    CaturusCommissioned two highest specification PACE-X Ultra rigs

    Commissioned two of our highest specification PACE-X Ultra rigs for Caturus, one in South Texas and the other in East Texas. These rigs entered service fully equipped with the MDS technology suite.

    Capital programs

    1
    SANAD 50-rig newbuild programunderway
    Period spend: $46M (Q2 FY26), ~$130M (Q3 FY26 guidance)

    Benefit: 16 rigs delivered to date, 34 rigs remaining

    34 rigs remain to be delivered under the 50-rig newbuild program. The reduction in SANAD's newbuild outlook reflects the movement of certain construction milestones into early 2027.

    Risks & headwinds

    3
    Middle East Geopolitical TensionsQ2 FY26

    financial impact of the related cost pressure was broadly in line with our guidance

    Mitigation: SANAD's operations have continued without interruption, and the growth ahead is substantial.

    Slower CollectionsQ2 FY26

    Adjusted free cash flow of $12 million, modestly above our guidance. The mix differ from our expectations, reflecting the timing of SANAD newbuild milestones and slower collections in Mexico and the United States.

    Mitigation: We view the collections headwind as timing related and expect this will normalize over the balance of the year.

    Lower 48 Pricing Gains LimitedQ3 FY26

    Daily adjusted gross margin is expected to remain approximately flat with the second quarter at $13,800

    Mitigation: We expect U.S. industry activity to build progressively, supported by stable oil prices and an improving outlook for natural gas demand.

    What to watch in Q3 FY26

    5

    SANAD newbuild program progress

    next quarter
    Current16 rigs delivered, 34 remaining
    TargetNext tranche discussions, continued deliveries

    Why it matters

    SANAD's expansion program is a key driver of international earnings growth for Nabors.

    And we expect that the next tranche will be discussed very shortly actually, probably within the next quarter, and we'll have complete visibility on it, but we're confident that the program is going to continue.

    Q&A highlights

    6

    Seeking insights on activity and pricing trends, particularly regarding the target of mid-$30,000s for leading-edge pricing.

    Management expects continued discipline from major players, with private operators driving recent activity. Super-spec rig utilization is increasing, which is expected to accelerate pricing. They anticipate reaching the mid-$30,000s for leading-edge pricing by year-end.

    “I think right now, we're focused on continued utilization of the current rigs and seeing some tightening of the pricing as things move forward, particularly as operators demand more upgrades of existing equipment.”

    asked by Joseph Laetsch · answered by Anthony Petrello

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Raised Outlook

    Nabors exceeded its Q2 EBITDA guidance across all segments, driven by strong operational execution in Lower 48 and international drilling. This performance led to a raised full-year 2026 EBITDA guidance of $920 million to $930 million and adjusted free cash flow guidance of $20 million to $30 million, despite SANAD's cash consumption. The company's consolidated EBITDA margin expanded 107 basis points to 27.2% with a 54% fall-through, reflecting outstanding portfolio-wide execution.

    02

    International Growth and SANAD's Role

    The international business continues to strengthen, particularly in Saudi Arabia where the SANAD JV placed its 16th newbuild rig and returned two suspended rigs to service. SANAD, with 55 rigs and a 28% market share, is central to Saudi Aramco's natural gas expansion, with 34 newbuilds remaining in the 50-rig program, providing a long runway for growth. Operations in the Middle East continued without disruption despite regional geopolitical tensions.

    03

    Lower 48 Market Dynamics

    The U.S. Lower 48 market saw a notable upward turn in Q2, with the Baker Hughes land rig count increasing by 31 rigs or 6%. Nabors added five rigs, with nearly 70% of its working fleet serving publicly traded operators. Daily revenue improved by over $900 sequentially to $33,555, and leading-edge pricing is expected to reach or exceed mid-$30,000s by year-end 2026/2027 as utilization tightens. The company expects to exit Q3 with 74 rigs operating in the Lower 48.

    04

    Technology and Innovation as a Differentiator

    Nabors' technology strategy, focused on improving drilling performance and expanding customer returns, was evident in Q2. NDS revenue grew 11% on Nabors' Lower 48 rigs and 12% on third-party rigs, driven by demand for software products like MPD and RigCloud. The deployment of PACE-X Ultra rigs with the full NDS suite generates over $40,000 daily revenue, showcasing the 'rig as a platform' strategy and creating higher revenue and stronger margins.

    05

    Strategic International Markets

    Beyond Saudi Arabia, Nabors highlighted strong performance in Kuwait (three deep gas rigs on long-term contracts) and Oman (four rigs, multiple tenders). Argentina is a compelling success story with 13 operating rigs (soon 14) and a 30% market share, where NDS contributed 46% of EBITDA in H1 2026. Venezuela presents an improving long-term opportunity with five idle rigs positioned for potential activity resumption, given its large resource base and proximity to refining capacity.

    06

    Capital Discipline and Allocation

    The company remains committed to capital discipline, with full-year CapEx guidance of $710 million to $730 million, including $325 million to $335 million for SANAD newbuilds. Management emphasized selective deployment of capital only where expected returns and contract duration justify the investment. Nabors aims to reduce gross debt by at least $100 million in 2026 and achieve a net leverage of approximately one turn long-term.

    AI-generated summary of the company’s earnings call. Not investment advice.