CORRESP 1 filename1.htm

 

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