Nabors Industries Ltd Q2 FY2021 Earnings Call

Good day. And welcome to the Q2 2021 Nabors Industries Ltd. Earnings 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 Corporate Development and Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining Nabors’ second quarter 2021 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 certain 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. With that, I will turn the call over to Tony to begin.

Good morning. Thank you for joining us as we review our results for the second quarter of 2021. This morning, I will begin with overview comments. Then I will follow with highlights from the quarter and the discussion of the markets. William will discuss our financial results. I will make some concluding remarks before opening up for your questions. Let me start by saying our operations performed quite well in the second quarter. We also made significant progress across multiple strategic initiatives. Adjusted EBITDA in the second quarter topped $117 million. Execution across all of our segments was strong. Our global rig count for the second quarter increased by seven rigs, driven by growth in the U.S. drilling and International segment. Once again, we made progress on our priorities to generate free cash flow and reduce net debt. Free cash flow in the quarter approached $70 million after funding CapEx of $77 million. These results for the second quarter exceeded the expectations, which we laid out on our last conference call. Net debt improved by $58 million in the second quarter, driven by our free cash flow. I am very pleased with our financial performance through the first half of 2021. I am looking forward to reporting further progress over the balance of the year. Next, I would like to highlight five key focus areas as you think about Nabors. First, our leading daily margin performance in the Lower 48; second, the upturn in our International business; third, improving outlook for our technology and innovation; fourth, progress on our commitment to delever; and fifth, our progress in ESP and the energy transition. Let me start with Lower 48 drilling margins, the margin performance in this core business remains strong. Daily margin once again achieved the $7,000 mark. Clients realized value from our leading fleet capabilities and field performance. We maintained our disciplined approach to pricing as we deployed rates. This unique combination is responsible for these robust results. Another way to look at our performance is to combine our drilling margin with the market generated by NDS in the Lower 48. That increment amounts to approximately $1,900 per day. So we’re generating almost $9,000 per week per day on this basis. As you compare results and business models from our peers across the industry, we think it’s important to consider this point. Next, our International business, our financial results benefit from our historic pricing discipline and our performance in the fields. Coming out of the pandemic, significant improvements have occurred in Argentina, Colombia, and Russia. These markets collectively account for approximately 25% of our International rig count. Saudi Arabia has seen an upturn in activity. We currently have 38 rigs working in the Kingdom. There’s potential we have a few additional rigs before the end of the year. In addition, our standard joint venture has been awarded five newbuilds today. These five units are expected to be deployed at approximately one per quarter starting in Q1 of 2022. They’re estimated to contribute approximately annualized EBITDA exceeding $50 million. As you know, there’s a long-term plan by Saudi Aramco to add successive generations of five rigs per year for an additional 45 rigs. In the Saudi Aramco procedure this plan, we expect a similar EBITDA contribution in each successive year. These new build rigs and their economics were one of the main attractions for our participation in the joint venture. Next, technology and innovation. Our technology pipeline remains full. NDS’ penetration on all Lower 48 rigs with at least five services exceeded 70%. On third-party rigs, we are seeing strong growth and penetration. Revenue on third-party rigs increased sequentially by more than 50%. Growth occurred across most of the service lines. The third-party rig market remains fertile for NDS. We are investing to ensure that our products are rig agnostic, even though the full potential of the NDS product suite is still maximized when run on Nabors rates. For NDS in total, we are expanding our digital platform and expect to see greater penetration of these products across the market. Now, let’s discuss delevering. We had quite a bit of significant news on this topic recently. We completed the program of distribution of equity warrants to our shareholders. This innovative structure places value in the hands of our equity holders. The warrants can be exercised with cash or certain of our outstanding notes. This transaction could result in substantial delivering of our capital structure. We also signed an agreement to sell our Canadian drilling assets. This sale will result in cash proceeds of approximately $94 million, plus we will liquidate the working capital in the business. With this deal, we pull-forward multiple years of free cash flow, which we can deploy into our strategic priorities. In summary, we’ve made material progress even through the downturn. We look forward to making additional headway in the future. I’ll finish this discussion of our highlights with ESG and the transition. We continue to refine and enhance our focus on ESG. We recently updated our Annual ESG Report with additional disclosure. This drove a 2-point improvement in our environmental score from ISS. In addition to the environmental performance, we also recorded improvements in several categories of our social score. Our position in the energy transition also began to take firmer shape. Our strategy here is fully supported by the Nabors Board and our investors. The scale of the energy transition opportunity is potentially huge. We believe it holds very attractive prospects for Nabors in two broad areas; first, to optimize the environmental footprint of our own operations; and second, to drive the transition in adjacent markets. Significantly, we believe our global footprint, technology, and scale can be applied to drive initiatives in the transition space. For example, we are working both to reduce our own carbon footprint and to acquire expertise in the border energy market. We have exclusive agreements to market multiple fuel additives, which materially reduce fuel consumption and emissions from our own large diesel engines, as well as other fleets. We have also identified adjacent areas that we think are synergistic with our core operation. These include investing in several early-stage geothermal energy companies. We believe the geothermal market holds enormous promise as a source of baseload renewable power. These ventures will enable us to deploy our expertise in this burgeoning field. We expect to realize investment returns to measure with the opportunities. We recently agreed to license innovative IP in the carbon capture area. The target markets are in drilling, as well as in other verticals. We’re excited about the technology, which we see ultimately reaching beyond the oilfield, so stay tuned. We are evaluating a variety of investment structures in the energy transition. Our intent is to enable our participation across the spectrum of investment opportunities. We are confident in our ability to participate in and ultimately help drive the energy transition. We think this is a compelling opportunity. Now, I will spend a few moments on the macro environment. The quarter began with WTI just below $60. But early in June, WTI broke above $70. Since then, it has climbed to mid-$70s and fluctuated between there and the high $60s. This range should be conducive to increases in drilling activity across markets. Next, I’ll review the rig count. Comparing the averages of the second quarter to the first quarter, the Baker Hughes Lower 48 land rig count increased by 16%. According to Inverness, from the beginning of the second quarter through the end, the Lower 48 rig count increased by 31 or approximately 6%. The growth rate amongst smaller clients significantly outpaced the growth in larger operators at 8% versus 2%. With our focus across the spectrum of clients, our average working rig count in the second quarter increased by 21%. This comparison excludes rigs stacked on rate. Our total average rig count increased by seven rigs, while the number of rigs stacked on rate declined by four. Once again, we survey the largest Lower 48 clients. This group accounts for approximately 35% of the working rig count. In comparison, on the last call, the same group accounted for 40% of the working rig count. Our review of the clients shows a modest uptick in activity planned for the balance of 2021. In our international markets, we saw demand increase about as expected. In our served markets, we gained incremental share in the second quarter, as activity levels in those markets continued to recover from their pandemic lows. To sum up, commodity prices have risen significantly as global economic activity increased. In the current range, oil prices generate acceptable operator economics in virtually all areas where we operate. With that in mind, we remain vigilant to the potential impact of a resurgence of the virus. That risk, notwithstanding, the current commodity environment remains conducive to increased drilling activity. Now, let me turn the call over to William who will discuss our financial results and guidance.

Thank you, Tony, and good morning, everyone. The net loss from continuing operations of $196 million in the second quarter represented a loss of $26.59 per share. Results from the quarter included a net loss of $81 million or $10.80 per share related to one-time impairments, which were largely attributable to the sale of our Canadian drilling assets and to reserves for tax contingencies in our International segment. Second-quarter results compared to a loss of $141 million or $20.16 per share in the first quarter. Excluding the previously mentioned one-time items, the $26 million quarterly improvement primarily reflects better operational results, as well as lower depreciation and income tax expenses. Revenue from operations for the second quarter was $489 million, a 6% improvement compared to the first quarter. Revenue continues to increase quarterly with higher commodity prices. Revenue for all of our segments increased substantially both domestically and internationally, with the exception of Canada, which experienced its normal seasonal downturn. Total adjusted EBITDA expanded by almost $10 million to $170 million for the quarter. This was significantly higher than we anticipated, primarily reflecting the strong increase in revenue across our markets. This quarterly improvement is part of a trend that we expect to continue during the second half of the year. U.S. drilling adjusted EBITDA of $59.8 million was up by $1 million or 1.7% sequentially on a 14% increase in revenue. Although our rig count increased, our average margins fell in the Lower 48 market. Lower 48 performance was in line with our expectations. Daily rig margins came in at $7,017, falling within our expected range. Nonetheless, leading edge day rates have inflected and high-quality regularization continues to increase with markets tightening for those rigs. For the third quarter, we expect the average daily rig margin to remain stable with the second quarter, as market day rates continue to grind upward. Second quarter Lower 48 rig count averaged 63.5, a quarterly increase of 13%, which was somewhat above our expectations. Currently, our rig count stands at 67. We forecast an increase of four to six rigs in the third quarter versus the second quarter average. Adjusted EBITDA from our other markets within the U.S. Drilling segment improved moderately. For these markets in the third quarter, we expect to remain at the second quarter levels. International adjusted EBITDA gained almost $9 million in the second quarter or 14% sequentially. The improvement came primarily from higher activity in markets with larger rigs, principally Saudi Arabia and Colombia, and generally strong operational performance in the eastern hemisphere. In the quarter, as anticipated, we experienced some headwinds in Mexico that we expect to persist into the third quarter. We continue to move rigs between platforms to accommodate modifications to the activity profile of our customer. We believe these changes in activity are linked to the higher commodity price. The unfavorable impact to our margins from these moves was $3.7 million in the second quarter and is forecast at $6 million in the third quarter. Also, we lost $1.9 million of revenue in the second quarter related to the general strikes and unrest in Latin America. Despite this friction, International delivered a strong quarter. Average rig count increased in line with expectations by 3.5 rigs to 68.3 or 5%. Current rig count in the International segment is 68. Daily gross margin for International increased by over $500 to $13,420 in the second quarter, beating our expectations by more than $900. The second quarter included approximately $900 per day in lost margin from the moves in Mexico and unrest in Latin America. Turning to the third quarter, we expect the International rig count to decrease slightly by one to two rigs, as two of our rigs move between clients. We forecast our average daily rig margin to remain in line with the second quarter. Our third quarter forecast includes approximately $1,000 in early termination fees from one of our rigs offset by additional lost margin from the moves in Mexico. As anticipated, Canada adjusted EBITDA of $3 million fell by $6.7 million, reflecting the seasonal spring breakup. At this point, we expect to close the divestiture of our Canadian drilling assets by the end of the month. In the third quarter, we will include one month of activity for our Canadian drilling operations before the closing of the transaction. Drilling Solutions adjusted EBITDA of $12.8 million, was up $1.3 million in the second quarter and a 10% revenue increase, trending positively in all product lines. Most notably, improved performance in software and casing running services. Penetration of the performance drilling software in the Lower 48 and TRS internationally strengthened, driving the improvement. Lower 48 gross margin for the Drilling Solutions segment totaled $8.9 million for the second quarter. This comes on top of our Lower 48 Drilling gross margin of $40.5 million. We expect adjusted EBITDA in the third quarter to improve on the strong second quarter results. Rig technologies generated adjusted EBITDA of $2 million in the second quarter, an improvement of $2.6 million on a 34% revenue increase. The growth was primarily related to higher repairs and equipment sales. For the third and fourth quarters, adjusted EBITDA should move gradually upward on improved capital equipment sales. Now, I will turn to review our liquidity and cash generation. In the second quarter, total free cash flow was $68 million. This compares to free cash flow of approximately $60 million in the first quarter. Our cash generation was driven by improved collections and lower semiannual interest payments, offset by higher capital expenditures and other outflows, mainly annual insurance premiums. Capital expenses in the second quarter of $77 million were up from $40 million in the first quarter. These amounts include investments for the SANAD new builds of $32 million and $8 million for the second quarter and first quarter, respectively. In the third quarter, we forecast $80 million in capital expenditures, including $35 million for SANAD new builds. Our targeted capital spending for 2021 continues to be around $200 million, excluding approximately $100 million required for Saudi new builds. Free cash flow for the third quarter should total around $10 million to $20 million, excluding proceeds from the Canada divestiture and moderate strategic transaction outflows. At the end of the second quarter, our cash balance closed at $400 million and the amount drawn on our $1 billion credit facility was $558 million. Our net debt on June 30 was $2.4 billion, down from $2.9 billion at the start of the pandemic. We will continue to prioritize our future cash generation to debt reduction until we reach our leverage targets. We previously announced the distribution of warrants to shareholders. By the end of the quarter, we had seen a small amount of the warrants exercised with notes. This transaction is another demonstration of our commitment to delevering. Putting things in perspective, the last 15 months have probably been some of the toughest Nabors has faced. Activity dropped across the globe driven by industry fundamentals and COVID shutdowns, our rig count plummeted and our leading edge pricing dropped. Despite that, we maintained our EBITDA at levels higher than the combined EBITDA of our three closest public competitors. These results were the fruits of absolute focus and cost control and capital discipline. While we have also benefited from our overall strategy of maintaining the highest quality fleet with leading drilling performance, driven by our investments in automation, software, remote operations, and data infrastructure. As a result of our new revenue profile, our capital expenditures as a percent of revenue have dropped. In addition, our international business has delivered once again, by helping us to much better absorb the sharp drop-off in U.S. activity in comparison to our competitors. Together with our superior operational results, we generated meaningful cash flow for the past 15 months while also reducing our net debt by $500 million during the period. Despite the headwinds at the beginning of last year, just before the pandemic, we also issued $1 billion of new long-term debt to address near-term maturities. And we then renegotiated our credit facility during the worst of the pandemic to avoid potential covenant breaches and allow us to complete a material debt exchange transaction at the end of last year. I am convinced we have been good stewards of our shareholders' capital during the toughest of times. As we now launch a significant new initiative into the rapidly expanding field of new energy, we will maintain our commitment to absolute capital discipline and continued debt reduction. As you may have seen from recent announcements, despite the scope of our initiatives, we have limited our cash deployed into these activities. We have restricted ourselves to placing minority investments in companies adjacent to our own business. And we have signed alliance agreements with these companies to help them develop their technologies. In concluding, I would like to emphasize something, despite our aspirations to develop our clean energy initiatives into a significant portion of Nabors’ portfolio over time. We will retain our capital discipline, as well as our focus on cash generation and debt reduction. With that, I will turn the call over to Tony for his concluding remarks.

Thank you, William. I will now conclude my remarks this morning with the following. These second quarter results on the top core performances in the first quarter reinforce that our strategy is working and we’re making progress toward our goals. Once again, we made significant headway to delever. At the same time, we advanced our imperative to provide better execution with our portfolio of leading-edge technologies. The resilience of our financial results through the depths of COVID and now into the recovery is a testament to our robust portfolio of businesses. This process began years ago, as we continually reevaluate the portfolio. We sold assets and businesses, pressure pumping and well servicing most notably, and now we’re investing in digitalization and automation and the transition. This act of management has served us well and we expect it to continue. We have entered a new phase in the evolution of the global energy industry. Nabors has played a key role throughout the development of the drilling industry. We are investing now to extend this leadership in the future. That concludes my remarks this morning. Thank you for your time and attention. With that, we will take your questions.

Thank you. Our first question comes from Taylor Zurcher with Tudor, Pickering, Holt. Please go ahead.

Hey, everyone. Thanks for taking my question. My first one is on International, the guidance for Q3 was pretty clear from an activity perspective. But as we think about the back half of the year, you talked about a couple more rigs in Saudi, excluding the new builds potentially going back to work and as OPEC Plus starts to roll back some other production curtailment? I suspect activity in some of the core GCC countries is likely heading higher into the back half of the year. So just curious if you could frame for us, maybe thinking into Q4 and beyond, just any high-level thoughts on how we should be thinking about the cadence of international activity and momentum from here?

Well, what we currently have some visibility as we reported last quarter, in Saudi I think toward the end of the year there should be an additional three rigs and possibly two more earlier in 2022. I think it’s fair to say, given today’s climate and the decline in prices, we are seeing a lot of robust activity across the region there, particularly in the Emirates, as well as in places like Kazakhstan. So activities generally are picking up, it’s all conducive to entering into 2022 with an uptick in activity, places that’s across the Board, both in the Middle East, as well as in South America as well. So I think all the signs are positive looking forward to 2022. And as I said, we have visibility on several rigs right now looking towards the end of the year.

And I think one thing we have noticed in the market right now is that there’s been an uptick in tendering activity by clients. So we have more tenders and some of them quite significant outstanding that we had. We’ve had in a long time.

Thank you for that information. My follow-up is regarding the new builds. The annual EBITDA contribution of $10 million is quite clear and will likely enhance our margins. I am curious about NDS and how it might be integrated into these new builder rigs moving forward. Do you have the capability to incorporate various products and services related to NDS into these new rigs? Additionally, how do you view the potential for further international expansion with NDS?

It's a great point. The expansion of NDS is now a key focus for us internationally, particularly in Saudi Arabia, where our existing rigs need upgrades to support the NDS platform. This will serve as our baseline. Additionally, new builds will create opportunities to integrate NDS services. Saudi Arabia is a primary target market for NDS, but there is also significant interest from other regional players looking to replicate the scale and optimization happening in the U.S. Operators, especially in the LCs, are eager to achieve similar performance levels, and NDS is perceived as a crucial component in this effort. We are making strong progress with NDS, having seen success in Argentina, where we are collaborating with a major player. NDS has delivered impressive performance improvements for their rigs. Our latest automation, the SmartDRILL application, allows operators to automate the entire rig sequence, offering functionalities that other market products lack, and enabling the integration of additional services. We believe this will provide substantial value for operators and significant upside for us, making it a high priority at this time.

All right. Good to hear. Thanks for the answer.

Your next question comes from Dan Kutz with Morgan Stanley. Please go ahead.

Hey. Thanks. Good morning.

Good morning.

Good morning.

Hey. So I just wanted to ask, appreciate the color on pricing and activity in the press release and on the call so far. I was just wondering if you could kind of characterize or kind of juxtapose what you’re seeing in terms of pricing traction in the U.S. versus International markets, and kind of what your outlook is for those two markets moving forward?

The positive news is that in the U.S., activity is steadily increasing across all regions. It's reasonable to say that leading-edge rates are rising into the high teens and low 20s. We're seeing a convergence between our current average working rig rate and the leading edge, indicating that a crossover is likely to happen soon. In the sector overall, we won't reach a point of inflection until we hit around 70% utilization. Currently, we have one of the highest utilizations for super spec rigs at about 61%, while some competitors are slightly lower. As we all head toward that 70% utilization threshold, we expect to reach a pricing inflection point, which may require an additional 500 rigs. We're optimistic about achieving that. In the meantime, the market discipline among players is proving beneficial, and given today's circumstances in the U.S., long-term deals may not materialize soon, which allows us to increase our pricing as conditions improve. On the international front, the advantage lies in having term coverage from our portfolio of contracts, leading to more stability and less volatility, which has been advantageous during downturns. Compared to our three largest competitors, our EBITDA has been stronger thanks to our international contracts. Pricing increases may take time because these contracts don’t reflect rapid changes. However, as the market gains momentum, there’s a shortage of high-quality rigs available internationally, which is likely to push us toward pricing that reflects replacement costs. As we look to the international market, we anticipate higher price points translating into meaningful gains, though raising prices across our entire fleet may be more challenging. Nonetheless, recent international contracts have come in at significantly higher prices than those signed a few quarters ago.

Thank you for the information. I want to revisit the SANAD new build program. I appreciate the details you’ve shared regarding capital spending plans this year. I'm curious if you could provide any range for what CapEx might look like on a quarterly basis beyond 2021. Could the $35 million per quarter CapEx number for the second half be a reasonable estimate, or is there potential for that to change, depending on the progress of the new build program with the five rig per year plan?

The plan is to add five rigs a year, which is relatively easy to estimate, but it depends on Aramco providing the drilling contracts. Currently, this projection is not fixed, as it relies solely on that. We have a projected growth roadmap, although we are still determining the exact amount of capital expenditures. Our plans assume we will add five rigs annually over the coming years, which we consider stable since we know the costs and number of rigs required. The rest of our portfolio is performing reasonably well, with expected expenditures of about $200 million a year for everything beyond the new builds. Capital expenditures are also tied to the number of operating rigs, which we expect to increase. Therefore, next year’s numbers will likely be higher than $200 million but will align with the rigs we have planned. We do not have major initiatives to grow our rig presence, as we have enough idle capacity to support expansion next year without needing to invest in additional rigs outside those in Saudi Arabia.

Got it. Understood. Thanks for the color. I’ll turn it back.

Your next question comes from Karl Blunden with Goldman Sachs. Please go ahead.

Hi. Good morning. Congrats on the strong results again this quarter on both EBITDA and the cash flow side.

Thanks, Karl.

Just one question on your slides here, it looks like for the U.S. Lower 48. You mentioned there 64 rigs on revenue, which high spec are 55. So when I look at that sequentially, it looks like most of the growth is coming outside of high spec. But you’re also reporting increased utilization of the high spec rig. So I was just hoping you could give a bit more color on that dynamic both the sequential change and then what you expect going forward, please?

I am unsure what you are referring to, but all the rigs we are currently operating are high specification. We have 67 rigs in total at the moment, out of which 110 are high spec. This means that 67 out of 110 rigs are currently being used, which amounts to 61%. All of them are high spec.

Got you. Maybe I’ll follow offline just to make sure I understand the numbers there. With regard to the warrants, you mentioned that a small amount of the warrants were exercised using bonds during the quarter. When you think about this longer term, and obviously, depending on where the share price is. Could you talk a little bit about the conditions under what you’d consider committing the warrants to essentially encourage them to the exercise and accelerate debt reduction?

Well, I think, we need some time to let the mechanism work. So got to step back a second to understand what this is all about. Basically, it was a means to allow the discount of the bond to be captured and to be shared with the shareholders. As you know, there is no market available where debt can be easily swapped with equity, don’t have it really happens in bankruptcy and that exchange usually results in the equity guys getting the short end of the stick. So what this really is a way of allowing our shareholders in a normal fashion to be given the opportunity to capture that bond discount themselves through the exercise of the warrants. Now for that to be meaningful, what you got to do is do the calculations with the shares and updates where the exercise price, you get the bonus number of shares, you got to calculate the amount you value the shares you get if you exercise using the value of the warrants of the bond at face amount. When you do the math, you’ll see that there is a lot of upside for debt holders for debt is trading at a discount to in effect get a premium to that current market price through that exercise. The good news is since it’s been announced there has been a really huge volume of trading in the warrants. In fact, if you compare our warrant transaction to one that was done by us, I think the first day of trading we would double the amount of activity and volume compared to them. And so I think the warrants are now being put in a position where the person owns whether it’s a shareholder or bondholders for the warrants. I think it’s being positioned that way the stock price gets into the zone, where it’s economic and where there’s upside, that they’ll be positioned to exercise. So we’re obviously not there yet. But as we march when we look at the matrix, once that happens that we’ll see. Once that happens then we’ll assess what the future of the warrants is, but we expect a good portion of the warrants we exercise to capture this discount.

That’s very helpful and certainly in line with the debt reduction goals. Is there any kind of timing element around that and exercise relative to extending the bank facility or those two disconnected transactions?

That's a great question. We want to see the outcome of a warrant transaction and understand our balance sheet better. We believe we will be in a stronger position than we are now. Additionally, we expect to receive proceeds from Canada, contributing to a solid second half in free cash flow generation. These factors should facilitate a more productive conversation with our lenders. I don't anticipate any changes regarding our credit facility in the next couple of months, but there may be developments toward the fourth quarter or the end of the year. Furthermore, we are considering options for issuing additional long-term debt to address short-term maturities and possibly extend our revolver. All of this remains open, but having a benchmark from the completed warrant transaction will provide clarity on what is possible.

Thanks. You anticipated a bunch of my questions. Really appreciate the time.

Thanks, Karl.

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

Thank you everyone for joining us this morning. That’ll wrap up our call. If you have any follow-ups please contact us at Nabors and we’ll end the call there. Thank you.

Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.