Good afternoon, and welcome to the Nabors’ Third Quarter 2020 Earnings Release Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to William Conroy, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone. Thank you for joining Nabors' third quarter 2020 earnings conference call. Today, we will follow our customary format with Tony Petrello, our Chairman, President, and Chief Executive Officer; and William Restrepo, our Chief Financial Officer, providing their perspectives on the quarter's results along with insights into our markets and how we expect Nabors to perform in these markets. In support of these remarks, a slide deck is available, both as a download within the webcast and in the Investor Relations section of nabors.com. Instructions for the replay of this call are posted on the website as well. With us today, in addition to Tony, William, and myself, are Siggi Meissner, President of our Global Drilling Organization; and other members of the senior management team. Since much of our commentary today will include our forward expectations, they may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to risks and uncertainties as disclosed by Nabors from time to time in our filings with the Securities and Exchange Commission. As a result of these factors, our actual results may vary materially from those indicated or implied by such forward-looking statements. Also, during the call, we may discuss certain non-GAAP financial measures, such as net debt, adjusted operating income, adjusted EBITDA, and free cash flow. All references to EBITDA made by either Tony or William during their presentations, whether qualified by the word adjusted or otherwise, mean adjusted EBITDA, as that term is defined on our website and in our earnings release. Likewise, unless the context clearly indicates otherwise, references to cash flow mean free cash flow, as that non-GAAP measure is defined in our earnings release. We have posted to the Investor Relations section of our website a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures. As you are aware, Nabors currently has a capital markets transaction underway. Accordingly, while we welcome your questions regarding our results, outlook, and view of the markets, we will not field any inquiries regarding this transaction. With that, I will turn the call over to Tony to begin.

Good afternoon. Thank you for joining us as we review our results for the third quarter of 2020. I will begin with comments on our actions in light of the current environment. Then I will follow with a discussion of the markets and highlights from the quarter. William will follow with the financial results. My wrap-up comments today will focus on the evolution of the market for advanced technology and our leadership position driving this progress. I would like to start by recognizing the Nabors staff for their efforts and performance. The twin challenges of the pandemic and the industry environment are unprecedented. Our team has excelled in maintaining the continuity of our global operations while improving our industry-leading safety record. The health and safety of our employees is paramount. We continue to make progress towards mission-zero with the ultimate goal of zero injuries. On the financial front, our third quarter results illustrate the full impact of the expense reductions implemented earlier this year. I am pleased with the progress to date. I'm also challenging the team to optimize our business processes and to add focus on cost avoidance. Our outlook on capital spending has also improved and we are now targeting approximately $20 million for the full year 2020. This amount is $40 million lower than our previous target and substantially below last year's spending of $424 million. Our immediate financial priorities remain free cash flow generation and net debt reduction. As a result of our persistent efforts, we continue to make material progress on these goals. Now, I will spend a few moments discussing the macro environment. During the third quarter, near-month WTI traded in a relatively narrow band around $40. This lower volatility is a market change from the extremes we saw in the first half. Also in the third quarter, global oil consumption increased by almost 11% versus the second quarter. That restoration of demand has contributed to increased operator confidence. Against this backdrop, we have also seen additional consolidation activity. Comparing the third quarter average to the second quarter, the Baker Hughes Lower 48 land rig count declined by 37%. The rig count appears to have bottomed in August at 226 rigs. Since then, activity has increased. The Baker count recently stood at 278, a gain of 23% from the bottom. This increase in the industry rig count has mainly resulted from activity increases among second and third-tier clients. The 20 largest operators, as we characterize them, have been mixed; some have added rigs, while others have released units. In the aggregate, this group is essentially flat. In this environment, our relative market share performance against competitors has been notable. Based on quarterly average rig counts, we gained 3 points of share in the third quarter. In our international markets, the current activity tempo varies by country. In Argentina and Colombia, the active rig count has increased. You will recall that in both of those markets, the response to the coronavirus in the spring was a total shutdown of drilling. In our major markets in the Eastern Hemisphere, customer reactions were initially muted. Subsequently, several of these customers implemented deeper cuts. Our largest international market, Saudi Arabia, experienced an expected decline. We believe activity there will begin to increase at the beginning of next year. To summarize our view of the markets, global oil demand continues to grow. Oil inventories, which built substantially earlier this year, are being liquidated. These factors and the resultant stability in commodity prices appear to have improved operator confidence in the future outlook. The customer base has begun to respond with activity increases. The recent resurgence in COVID and its effect on oil prices could temper these positive developments. At this point, the impact is difficult to predict. I will now highlight a few aspects of our third quarter results. Total adjusted EBITDA was $114 million in the quarter. These results reflect activity which was largely in line with our expectations. Our financial performance, specifically in our Lower 48 operation and International segment, exceeded our expectations. With this EBITDA performance and after funding interest payments on our notes, we've reduced net debt in the quarter by approximately $6 million. Our global rig count for the third quarter totaled 132 rigs, an 11% decline from the second quarter. This scale and our geographic diversification continued to generate value and have enabled us to make progress on our strategic imperative to reduce net debt. In our Lower 48 business, our reported daily rig margin of $9,527 once again exceeded expectations that we laid out on the previous earnings call. In light of this performance, I would like to reiterate the driving factors. First, in the Lower 48, our rig capabilities are the industry's highest. In this market environment, these capabilities enable our clients to pursue their programs as efficiently as possible. Second, we remain the industry frontrunner in both operational and safety performance. This combination is a real differentiator for Nabors. Third, our relentless focus on reducing expenses across the enterprise continues to reinforce our margins. And fourth, our pricing has been supported by our industry-leading value proposition enabling us to mitigate the erosion in the market. We achieved some notable highlights in addition to our financial results. We introduced our RigCLOUD platform for digital operations in the second quarter. Since then, we have migrated 65% of our legacy user base over to RigCLOUD. Our offering currently includes more than 25 analytic apps with more to come. RigCLOUD recently took first place in a digital app development challenge organized by a super major. RigCLOUD beat a group of competing drilling contractors and technology companies. This type of head-to-head win bolsters our position as the digital leader in the drilling space. In the U.S., we added installations of both SmartSLIDE, our directional steering system, and SmartDRILL, our drilling process automation system. We also grew our well count for both SmartSLIDE and SmartNAV, our directional guidance platform. In fact, our well count in the third quarter for both SmartSLIDE and SmartNAV increased over the respective second quarter levels. In the third quarter, SmartNAV and SmartSLIDE were installed on 44% of our Lower 48 rigs. In other words, 44% of our rigs are running wellbore placement, either fully remote or to reduce directional drilling crews. That is a 15-point increase in penetration versus the second quarter. For SmartDRILL, our penetration increased to 90% of Nabors’ rates, up from 6% a quarter earlier. I think this sequential growth illustrates the market's rapid acceptance of our Smart apps. We run SmartROS, our advanced rig operating system, on our entire Lower 48 AC rig fleet. We are now actively marketing to third-party rig contractors and have a multi-rig installation with one customer in the Lower 48. We remain focused on ESG and our goal is to improve our standing. This quarter, we improved our ISS social score significantly. We also improved our environmental score by one notch. This progress demonstrates our commitment to ESG and we look forward to reporting additional progress in the future. I will now discuss our view of the market in more detail. Last week, the Lower 48 land rig count stood at 278. That is up by 11% since the end of the second quarter. Nabors’ working rig count over the same timeframe is up 14%. Comparing quarterly averages, Nabors’ third quarter working rig count, excluding rigs stacked on rate, declined by 20% versus the second quarter. We fared much better than the industry which dropped by 37%. The Lower 48 industry has risen 52 rigs or 23% since its low in August. Looking forward, we see evidence of the recent stability in oil prices, leading to an improvement in operator confidence. We have visibility to adding rigs over the next several weeks. We are in discussions for several more through the end of the year. In our international markets, we have already seen our activity increase gradually in Argentina and Colombia. We believe we have line of sight to rig restarts in Saudi Arabia. As market activity rebounds, we believe that clients will prefer contractors with established share and records of operational excellence. I am convinced Nabors will prevail in this environment. That concludes my remarks on our third quarter results and highlights on the market. Before William offers his remarks, I would like to recognize the Nabors team for their perseverance in this challenging environment. On behalf of the company, I would also offer our concern and best wishes to all those who continue to be impacted by the virus. Now I will turn the call over to William for his discussion of the financial results and guidance.

Thank you, Tony, and good afternoon, everyone. The net loss from continuing operations of $161 million in the third quarter represented a loss of $23.42 per share. Third quarter results compare to a loss of $152 million or $22.13 per share in the second quarter. The second quarter included total pre-tax charges of $58 million related to asset impairments and severance costs. This compares to charges of $5 million in the third quarter. The third quarter also saw a $22 million pre-tax sequential reduction in gains on debt repurchases. Revenue from operations for the third quarter was $438 million, a sequential reduction of 18%. With the exception of Canada Drilling, which benefited from the usual seasonal recovery, all of our segments experienced revenue decline. In the U.S. and in most international markets, activity in pricing continued to weaken. Lower 48 drilling revenue of $96 million decreased by $32.4 million or 25% as our average rig count declined and pricing deteriorated. In addition, zero margin reimbursable revenue decreased by $8.4 million versus the second quarter as we negotiated with our suppliers significant reductions in various reimbursable expenses. Although these negotiations reduced revenue, they also reduced our operating expenses by a similar amount. Lower 48 average rig count at 48.2 fell sequentially by 15.7%. Our average pricing for the fleet deteriorated by approximately 6%. Daily rig revenue in the Lower 48 at $21,760 decreased by just under $3,000 per day. Reductions in daily reimbursable revenue accounted for $1,500, while pricing reductions accounted for another $1,500. Revenue in our other U.S. markets decreased by a combined $11 million due to the release of two offshore rigs, coupled with the temporary idling on standby rate of an Alaska rig. International Drilling revenue of $248 million decreased by $52.7 million or 17%. This decrease was primarily related to a decline in activity across several markets, as average rig count dropped by 11 rigs or 13%. The third quarter benefited from the recognition of out-of-period revenue following negotiations with customers in several international markets. However, these pricing adjustments were more than offset by the absence of early termination revenue in the prior quarter. Canada Drilling revenue was $10.8 million, an increase of $7.2 million due to the normal seasonal ramp-up in activity. The improvement in Canada was more than offset by a reduction of $5.1 million and $3.8 million in Rig Technologies and Drilling Solutions respectively. The deterioration in Drilling Solutions was essentially driven by pricing pressure and by the sharp reduction in the Lower 48 industry rig count. This decline was somewhat buffered by sequentially higher revenue coming from our international casing running business. U.S. revenue for the Drilling Solutions segment fell by 37%, while international held up better, losing around 9%. Rig Technologies was also impacted by the lower drilling activity levels. While capital equipment sales have grounded to a halt, aftermarket sales and repairs have also fallen in line with a lower rig count. Adjusted EBITDA for the quarter was $114 million compared to $154 million in the second quarter. The decrease was driven by material reductions in our International and U.S. Drilling segments. More modest reductions in Drilling Solutions and Rig Technologies were almost fully offset by the Canadian seasonal improvement and by decreased expenses in corporate. I would also like to point out that both second quarter and third quarter benefited from unusual events in our International segment. The second quarter had a net gain of $8 million, which came primarily from early terminations. The third quarter benefited from the pricing adjustments mentioned previously, which totaled approximately $6 million. U.S. Drilling EBITDA at $60.5 million was down by $17.1 million or 22.1% sequentially. The Lower 48 performance came in slightly better than expected. Average rig count for the quarter was 48.2. Daily rig margin of $9,527, just above the high end of our previous guidance represented a reduction of $922 per day versus the second quarter. The reduction reflected the unfavorable pricing impact of $1,500 per day mentioned earlier, offset by a $600 per day reduction in compensation and maintenance expenses. Daily expenses of $12,200 fell by $2,100. Negotiated reductions in reimbursable costs, which we fully reimburse to our customers, accounted for $1,500 per day. Going into the fourth quarter, we expect daily rig margin to fall between $8,500 and $9,000 driven mainly by the pricing of renewals as the rigs roll off contracts. We are targeting operating costs in line with the third quarter. After reaching 45 rigs in the third quarter, our Lower 48 business exited the period with a rig count of 48. Looking to the fourth quarter, we expect average rig count to improve by approximately three rigs from the third quarter average. International EBITDA decreased by $21.6 million to $71.9 million in the third quarter. The third quarter continued to include the trends we experienced during the second quarter, mainly multiple rigs in temporary standby or COVID dayrates, offset by a very strong operational performance in Saudi Arabia. International rig count was 71, down 11 rigs in line with our expectations for the quarter. While eight of these 11 rigs were suspended temporarily, the other three had their contracts canceled towards the end of the second quarter. The net reduction in rig count was driven by actions taken by customers to mitigate the ongoing commodity supply-demand imbalance, which in certain markets also resulted in reduced pricing. Daily gross margin for the quarter was $12,678 as compared to $14,091 for the prior quarter. As mentioned before, both quarters included non-recurring benefits. Excluding those benefits in each quarter, daily margin was $13,000 and $11,800 for the second and third quarters respectively. The sequential erosion in daily margins was driven by the suspension and termination of a large number of rigs with higher-than-average margins. In addition, our lower rig count can result in less efficient absorption of our field overhead. We currently expect international fourth quarter rig counts to decrease by approximately four additional Middle Eastern rigs with relatively high margins. Although two of these rigs have been suspended temporarily, the remaining two have been released. In the fourth quarter, we expect the lower COVID and standby rates to persist. In addition, we anticipate results for our Saudi Arabia operation to revert closer to historical norms, particularly as we expect to bring back late in the year several Saudi rigs that are scheduled to resume operations in the first quarter. This ramp-up will add cost to the fourth quarter without any corresponding revenue. Finally, one of our platform rigs in Mexico was impacted by a lengthy move that should reduce EBITDA by $3 million. Because of these items, as well as the absence of the exceptional gains of $6 million in the second quarter, we are forecasting daily margins for the fourth quarter in the low to mid $10,000 range. That said, we are seeing improvement in Latin America. We have the potential to add incremental rigs in the first quarter. In addition, multiple rigs are on standby rates due to the market environment or the COVID restrictions. We anticipate that most of these rigs will return to work and to full dayrates by the end of the year. We also expect up to 10 Middle Eastern rigs which are now on our temporary suspension and zero dayrate to resume operations progressively during the first quarter. Consequently, we would anticipate a material increase in rig counts early next year. Also, if currently suspended high-margin rigs start to contribute and we recover our full dayrates on multiple rigs, we also expect a significant increase in daily margins compared to the levels of the fourth quarter. Canada adjusted EBITDA increased by $2.7 million to $2.2 million in the third quarter. Rig count at 7.4 rigs was 5.2 higher sequentially due to seasonality. We expect both rig count and daily margins to improve in the fourth quarter. We currently have 8 rigs operating in Canada. Drilling Solutions posted adjusted EBITDA of $7.1 million, down from $9.4 million in the second quarter. The decline in U.S. Drilling activity for Nabors and third-party rigs affected volumes for this segment. In addition, pricing pressure has impacted our results. We expect adjusted EBITDA in the fourth quarter to be at least equivalent to the third quarter. Rig Technologies reported EBITDA of $1.3 million in the third quarter, a decrease of $1.9 million. The fourth quarter EBITDA should be approximately in line with the third quarter. Now let me review liquidity and cash generation. In the third quarter, net debt declined by $6 million to $2.78 billion. Free cash flow defined as net cash from operating activities, less net cash used for investing activities, totaled $9 million. This compares to free cash flow of approximately $101 million in the prior quarter. The third quarter included semiannual interest payments of approximately $80 million as compared to minimal interest payments in the second quarter. During the third quarter, we experienced some weakness in collections as we had numerous ongoing negotiations with customers that delayed final invoicing. Nonetheless, we managed to once again deliver positive free cash flow by controlling our capital expenditures. Capital expenses in the third quarter of $39 million were $10 million lower than the prior quarter. We're now targeting $200 million in CapEx for the full year 2020. In the fourth quarter, we also expect to deliver positive free cash flow. Our target for the quarter is set at $90 million to $100 million. Our interest payments will drop sharply and collections are forecast to improve. Our credit facility, a key component of our liquidity, includes various covenants. I would like to highlight that during the quarter, we were able to successfully negotiate an amendment to our credit facility that removed the leverage ratio and at the same time, maintained the same total capacity and interest rate. The amendment also provides our company with additional flexibility to issue up to $500 million of new bonds, senior to all of our existing notes. At the end of the third quarter, our revolver draw stood at $753 million, following the repayment on maturity of $139 million in notes expiring in September. We also repurchased $47 million of other maturities. The remaining balance on our senior notes due in 2021 now stands at $129 million. Our cash and short-term investment balances closed the quarter at $514 million. One final item before Tony's conclusion. Late last week, we completed a private transaction, in which $115 million of the 0.75% convertible notes due in 2024 were exchanged for roughly $50.5 million of newly issued 6.5% Senior Priority Guaranteed Notes due in 2025. In addition, last week, we launched an offer to exchange our outstanding notes for up to $300 million in newly issued 9% 2025 Senior Priority Guaranteed Notes. For more information, I will refer you to our October 29 press release and related filings. With that, I will turn the call back to Tony for his concluding remarks.

Thank you, William. I will now conclude my remarks this afternoon with the following: A quarter ago on this call, I highlighted four transformation themes, which have gained traction among our stakeholders. These themes include: Integration, specifically of services around the wellsite; second, digitalization, which uses the volumes of available data to facilitate real-time optimized decision-making; third, automation, which improves speed, performance, and safety; and finally, ESG, which prioritizes the impact of our operations and the company on the wide-ranging set of constituencies in society. The breadth of our initiatives addressing these four themes is comprehensive and growing. When we began these initiatives, clear benefits to clients were an improvement in their well costs. These benefits have expanded to now include the following: Advancements in wellsite safety; higher quality wellbores; increased total well production; and positive change across the value chain and in our stakeholder community. Initially, the uptake for these initiatives was driven by the super majors. They recognized the inherent value and had the resources to utilize these products and services. At the same time, their sensitivity around ESG was high. More recently, we see growing demand for our advanced portfolio coming from smaller operators as well. Traditionally, their smaller scale prevented them from utilizing our advanced portfolio. They simply lacked the resources to realize its full benefits. As our portfolio has evolved, we have taken the approach to simplify the implementation by the customer. Let me offer two examples. First, we provide remote wellbore placement co-located in our operations center in Houston. This enables the operator to realize the benefits of remote directional drilling while leveraging the investment Nabors made here in our operational headquarters. The customers’ investment is negligible. The second example is our RigCLOUD platform. On RigCLOUD, we provide the data collection, analytics, and streaming that operators need to optimize planning, execution, and rig performance. It's an open ecosystem. It's compatible with Nabors and third-party rigs. In short, Nabors consolidates apps and client data from all sources. It then delivers information in the clients’ preferred format to any destination. That kind of infrastructure was beyond the reach of all but the largest operators. Today, we can bring it across the industry. It has been said that the current downturn is like no other. We view this environment as an opportunity for Nabors to reinforce its position as a technology leader in our market and to drive the adoption of digitalization and automation in the industry. That concludes our remarks this afternoon. Thank you for your time and attention. With that, we will take your questions.

And our first question comes from Kurt Hallead of RBC.

I would like to start by discussing the international outlook, which is somewhat more challenging to assess compared to the U.S. and Canadian markets. You mentioned expecting a significant increase in activity as we approach the beginning of next year, along with a notable rise in cash margins. Could you provide some context around this and how we should compare it to the third or second quarter of 2020?

We foresee a decline in rig count for the next quarter, expecting a drop of about four rigs, with three located in the Middle East and one spread across various markets. Additionally, we anticipate that the margin per rig will decrease to the low to mid $10,000 range. This is due to around $1,400 in costs for the quarter, which includes COVID-related expenses, issues related to Saudi Arabia, and costs related to moving a platform rig. Consequently, the normalized earnings per rig in the fourth quarter are projected to be about $12,000. Looking ahead, we expect around ten rigs to start operations in the Middle East throughout the first quarter of next year. In Latin America, we currently anticipate one rig in the first quarter and three more in the second quarter. While I don’t want to suggest that international operations have hit a low point, it certainly feels that way at the moment. It's important to consider the potential impact of OPEC and the risk of a second wave of COVID, which adds some uncertainty to the situation.

Yes. Yes, that's great. That's fantastic. And then, Tony, I want to maybe also touch on the technology dynamics you guys outlined quite a few years ago at your Analyst Day and then clearly, you've gained quite a bit of traction with it. So how do we think about the overall kind of growth dynamics you kind of referenced in your press release that the Drilling Solutions Group kind of will track overall rig count, I kind of see how that can play out. But shouldn't there be an opportunity for that business to kind of differentiate its performance relative to overall rig activity? And just kind of get your sense on how we could think about kind of a growth rate over the next couple of years for that business?

Sure. If you look back at Analyst Day, we outlined the landscape for automation at the rig site. We presented a slide that demonstrated how a directional drilling well could be managed with just the push of a button, and we were pioneers in this area. As highlighted in our statistics, there's been growing adoption of our SmartSLIDE software package. To address the challenges we faced in scaling this technology, we've focused on making our platform more accessible, not just for Nabors' rigs, but for all rigs globally. Additionally, we plan to extend this approach to our intelligent rig operating system, which essentially enhances what Nabors can do significantly. It features a sequencing engine for various optimizations and offers total flexibility. The aim is to leverage data from our RigCLOUD platform and expand it within a broader ecosystem, enabling access to various applications. Our vision is to achieve greater scale with this technology, and I am pleased with the progress we've made thus far. I believe the investment we made four years ago in this area was the right move, and now we need to start generating revenue from it, which is our objective.

Do you have any insights on whether we are looking at a growth rate of around 20% per year? Anything that might help us gauge that?

Right now, I’m not going to provide a specific number, but I can tell you that I'm expecting double-digit growth for sure. Putting an exact figure on it is difficult, but it's definitely double-digit growth. A growth rate of 20% would be on the conservative side.

The next question comes from Connor Lynagh of Morgan Stanley.

I would like to discuss the potential rig resumptions in the Middle East. At this stage, how confirmed are those plans, and to what extent are they still uncertain? Can you help us understand the situation, especially in light of discussions around possible incremental OPEC cuts or delays in production resumption? How should we approach our thinking regarding those potential scenarios?

Connor, we're feeling confident right now that those rigs will return. I think given the rigs that were put in suspension and communications we have with our client in that particular area, we feel fairly confident, very confident actually that those will turn. The actual average for those ten rigs is in question. We are assuming a four to five rig increase in average rig count versus the fourth quarter for this market.

That's just in Q1, you're saying the four to five?

Yes.

Okay. Got it. And then just wanted to get an update. Obviously, the SANAD plan was drawn in far different times than we're in today. So could you just discuss your general expectations on the pace of cash accumulation, if you think that will be sufficient to fund the newbuild program, how you expect the newbuild program to be executed over time? And I guess where this is ultimately driving, as we think about capital expenditures for next year and the year after, how should we think about that portion of the model?

When this program was created, it was during a time when Aramco expected the rig count to increase by over 100 rigs in the next decade. The plan was that half of those rigs would be designated for SANAD as part of the agreement. That was the goal. Over the past couple of years, we have not made as swift progress as we anticipated. However, this has been beneficial because we've been generating cash from our operations in the Kingdom. Currently, Aramco is reviewing their requirements and considering whether to proceed with the first order for five new builds. This is ongoing, and until Aramco formally issues that order to SANAD, we have no obligation to start building the rigs. The rigs will only be constructed if Aramco decides to move forward. They are currently weighing this decision against other capital expenditures. At this point, it seems more likely that they might place that order around the start of the year, but realistically, we do not expect any of the new builds to be completed until late 2021 or into 2022.

And just to reaffirm what you mean there. Is it….?

Connor, in answer to your question about the funding, I think between the cash we have in SANAD today and what we're accumulating going forward, the first three years is probably taken care of. And by then, that's a breakeven point in terms of cash flow. So cash flow being generated from the new rigs versus the new CapEx. So I think we're pretty comfortable with the situation in SANAD right now and the sense that we think it's self-funding.

Yes. Understood. And I just wanted to clarify Tony's comment there. The newbuilds not hitting until very late '21, is that a CapEx comment or an activity comment?

It seems overly optimistic to expect a rig to be delivered by the end of the year. There are many discussions happening with our customer, and several factors are still uncertain regarding funding. Therefore, we cannot provide definitive feedback at this time. However, we believe the effect on capital expenditures in 2021 will be minimal.

The next question comes from Karl Blunden of Goldman Sachs.

A really impressive cash flow performance recently and for the 4Q guide. Yes, maybe it's a little early to jump into '21. But do you think that CapEx can be controlled to a level that can allow you to generate cash or be neutral in 2021, given your assumptions about the market today?

I'll let my task master answer that. But we think that the CapEx should not be any higher than it was this year, which we're really proud of, but I'll let William amplify.

Yes. Obviously, there's a lot of uncertainty still about what activity levels will be like next year. But what I can tell you is that based on our latest forecast of what we assume for next year, we think that we will deliver cash next year somewhere in the mid-double figures millions of dollars. So again, I think part of it is because we are maintaining our CapEx discipline, but we're also very focused on becoming more efficient and keeping our overhead costs under control. And then we do see some rebound from the activity levels that we have today. So all in all, I think that forecast, it's not going to be as good as 2020, but it certainly will be a positive number in our view.

That's helpful. And then just with regard to other levers that you have to help you from a liquidity standpoint and thinking about liquidity relative to near-term maturities, obviously, you've got the exchange that's ongoing. So I won't ask about that. But where do things sit in terms of feasibility of extracting cash from the SANAD JV? And then in addition to that, you have a bit of extra priority guaranteed capacity remaining, about $150 million, is that something that you could look to also just extend maturities or get discount capture?

I'll refer you to the press release regarding the discount capture and similar matters. However, I believe there is some potential for excess cash, at least temporarily, over the next three years in SANAD. We haven't really engaged with Aramco in those discussions, so I can't provide my insights on how those discussions might progress or their likelihood of success. Still, any reasonable analysis of SANAD today and our future obligations suggests that there are a couple of hundred million dollars of excess cash at least temporarily. That's all I can say on that topic. I don't want to elaborate further. We believe that the working capital, which includes inventories and ongoing negotiations with our clients that are yet to be finalized, will flow into 2022 in terms of collections and could represent significant amounts as well. Therefore, we feel optimistic about the working capital, capital expenditures, operating expenses, and overheads. We believe our activity will have more longevity than some may expect. Overall, we feel these factors will positively impact our cash flow next year.

And our next question will come from Sean Meakim of JPMorgan.

Tony, in the Lower 48, as you indicated, even if the rig count has bottomed and we're now marginally improving activity, the mix of contracts rolling and rigs being activated, there's a headwind on average dayrates and margins on a quarterly basis. The slope of the recovery matters a lot in this equation, of course. But where do you see that fulcrum point where the addition of new rigs goes from being dilutive to the average to being accretive?

Well, obviously, today, daily rig margins are below our average dayrate. And therefore, anything incremental even at today's rates is going to cause some dilution. And it's up to us and our competitor colleagues to figure out how to manage that. Obviously, if you do want to grow, but you don't want to grow subsidizing at ever-lower rates. And so that's the balance and it’s up to us to figure out how to match that on an upturn. I guess the good news is if the upturn prospect does give you the ability over time to move those rates back up. And that's what the mission is for everybody, but I'm not maybe on my pricing strategy right now, except that we are aware of it. And that's our mission to try to incrementally add more rigs without taking down that margin below a number that makes sense. But that's the balance, and you hit it right on the nail. But as I said, the good news is in this landscape where there is some trajectory of an upside here, I think we're in a better position to make that happen. There's other people, by the way, that have done this, where they've traded. They've traded new day rate on new rigs against old contracts. So we haven't done that. We've tended to keep our contracts in place and get the benefit of the cash flow because on a present value basis, we don't like that kind of trade. But some of our competitors have done that, I guess, to accelerate their upswing. But again, I think that is just playing with NPVs and stuff. So what we're more concerned with is just trying to match that upswing the right way.

Understood. I appreciate that. And then...

In 2020, Sean, to answer your question. I think we will see what’s here in daily margins through the first half of next year.

Right. Okay. I appreciate that. So I was also hoping just to get a little more of your thoughts around international margins. 4Q sounds pretty tough, but you’re setting yourself up for a better first half of '21. There's always a lot of moving parts on this fleet, just given your own multiple continents, mix issues, different contract durations. There's always a lot to try to get to these margins. But I'm just curious to get your confidence level on 4Q being the trough for the cycle. Maybe you're around $10,000 a day. You peaked a few years back in the high teens. Just thinking about risks around lower lows, but then really more importantly, on a normalized basis, where do you think through cycle international margins can be and will be for this business?

I believe Tony articulated it well when he mentioned that our underlying margins, excluding the COVID-related penalties, which result in revenue loss, along with the Mexico platform transition, amount to $500. The impact from COVID is approximately $400, and we're also factoring in another $500 from Saudi Arabia in terms of cost leakage. All of these factors are being accounted for in the fourth quarter. Based on this, the fourth quarter margin would be around $12,000 per day for our current fleet. The positive aspect is that we have a significant number of higher-margin rigs currently in suspension that we anticipate bringing back next year, which should positively influence our margins. I believe the COVID penalty, mentioned earlier, costing about $400 per day, is likely to dissipate. In perspective, while it's challenging to pinpoint an exact number, we expect normalized margins to fall within the $13,000 to $14,000 per day range next year, with the hope of improving further as the year goes on. We've faced some challenges with the reduction in the Kazakhstan rig count, which historically held some of our highest margins, and there has also been a decline in Colombia, both of which have significantly impacted us. Therefore, returning to the $17,000 range we previously experienced will require considerable effort.

This concludes our question-and-answer session. I would like to turn the conference back over to William Conroy for any closing remarks.

We'll wrap up the call there. Thank you, ladies and gentlemen, for joining us this afternoon. If you have any questions, please feel free to call or email, as always.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.