Nabors Announces Revised Third Quarter 2014 Results; GAAP Earnings per Share of $0.34

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)-REVISED

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2014

September 30, 2014

(In thousands, except per share amounts)

As reported

Adjustments

Revised

As reported

Adjustments

Revised

Revenues and other income:

   Operating revenues 

$ 1,813,762

$          -

$  1,813,762

$  5,020,361

$          -

$ 5,020,361

   Earnings (losses) from unconsolidated affiliates

(2,851)

-

(2,851)

(5,872)

-

(5,872)

   Investment income (loss)

2,189

-

2,189

10,235

-

10,235

      Total revenues and other income

1,813,100

-

1,813,100

5,024,724

-

5,024,724

Costs and other deductions:

   Direct costs 

1,181,986

-

1,181,986

3,310,220

-

3,310,220

   General and administrative expenses

138,967

-

138,967

406,863

-

406,863

   Depreciation and amortization

286,581

-

286,581

851,528

-

851,528

   Interest expense

43,138

-

43,138

134,251

-

134,251

   Losses (gains) on sales and disposals of long-lived assets and other expense (income), net

(1,513)

-

(1,513)

16,467

-

16,467

   Impairments and other charges

-

-

-

-

-

-

      Total costs and other deductions

1,649,159

-

1,649,159

4,719,329

-

4,719,329

Income (loss) from continuing operations before income taxes

163,941

-

163,941

305,395

-

305,395

Income tax expense (benefit)

106,515

(45,004)

61,511

131,279

(45,004)

86,275

Subsidiary preferred stock dividend

-

-

-

1,984

-

1,984

Income (loss) from continuing operations, net of tax

57,426

45,004

102,430

172,132

45,004

217,136

Income (loss) from discontinued operations, net of tax

4,005

-

4,005

4,488

-

4,488

Net income (loss)

61,431

45,004

106,435

176,620

45,004

221,624

     Less: Net (income) loss attributable to noncontrolling interest

(387)

-

(387)

(1,213)

-

(1,213)

Net income (loss) attributable to Nabors

$     61,044

$     45,004

$     106,048

$    175,407

$  45,004

$    220,411

Earnings (losses) per share: (1)

   Basic from continuing operations

$            .19

$           .15

$            .34

$             .57

$       .15

$           .72

   Basic from discontinued operations

.02

-

.02

.01

.01

.02

      Basic

$            .21

$           .15

$            .36

$             .58

$       .16

$           .74

   Diluted from continuing operations

$            .19

$           .15

$            .34

$             .56

$       .15

$           .71

   Diluted from discontinued operations

.01

-

.01

.02

-

.02

      Diluted

$            .20

$           .15

$            .35

$             .58

$       .15

$           .73

Weighted-average number of common shares outstanding: (1)

   Basic 

292,621

-

292,621

292,613

-

292,613

   Diluted 

295,005

-

295,005

295,353

-

295,353

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS-REVISED

(Unaudited)

September 30, 2014

(In thousands)

As reported

Adjustments

Revised

ASSETS

Current assets:

Cash and short-term investments

$     464,818

$                -

$      464,818

Accounts receivable, net

1,624,441

-

1,624,441

Assets held for sale

158,327

-

158,327

Other current assets

540,828

4,057

544,885

     Total current assets

2,788,414

4,057

2,792,471

Long-term investments and other receivables

2,568

-

2,568

Property, plant and equipment, net

9,016,508

-

9,016,508

Goodwill

512,203

-

512,203

Investment in unconsolidated affiliates

60,451

-

60,451

Other long-term assets

235,139

-

235,139

     Total assets

$ 12,615,283

$         4,057

$ 12,619,340

LIABILITIES AND EQUITY

Current liabilities:

Current debt

$            196

$                 -

$              196

Other current liabilities

1,416,510

(1,125)

1,415,385

     Total current liabilities

1,416,706

(1,125)

1,415,581

Long-term debt

4,255,136

-

4,255,136

Other long-term liabilities

1,115,211

(39,822)

1,075,389

     Total liabilities

6,787,053

(40,947)

6,746,106

Equity:

Shareholders' equity

5,817,869

45,004

5,862,873

Noncontrolling interest

10,361

-

10,361

     Total equity

5,828,230

45,004

5,873,234

     Total liabilities and equity

$      12,615,283

$         4,057

$ 12,619,340

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

COMPUTATION OF EARNINGS (LOSSES) PER SHARE-REVISED

(Unaudited)

A reconciliation of the numerators and denominators of the basic and diluted earnings (losses) per share computations is as follows:

Three Months Ended

Nine Months Ended

September 30, 2014

September 30, 2014

(In thousands, except per share amounts)

As reported

Adjustments

Revised

As reported

Adjustments

Revised

BASIC EPS:

Income (loss) from continuing operations, net of tax

$           57,426

$         45,004

$    102,430

$          172,132

$          45,004

$     217,136

   Less: Net (income) loss attributable to noncontrolling interest

(387)

-

(387)

(1,213)

-

(1,213)

   Less: Redemption of preferred shares

-

-

-

(1,688)

-

(1,688)

   Less: Earnings allocated to unvested shareholders

(889)

(690)

(1,579)

(2,596)

(690)

(3,286)

Adjusted income (loss) from continuing operations - basic and diluted

$            56,150

$         44,314

$    100,464

$            166,635

$          44,314

$     210,949

Income (loss) from discontinued operations, net of tax

$              4,005

$                   -

$         4,005

$                 4,488

$                    -

$         4,488

Weighted-average number of shares outstanding-basic

292,621

-

292,621

292,613

-

292,613

Earnings (losses) per share:

     Basic from continuing operations

$                 .19

$               .15

$             .34

$                    .57

$               .15

$             .72

     Basic from discontinued operations

.02

-

.02

.01

.01

.02

Total Basic

$                 .21

$               .15

$             .36

$                    .58

$               .16

$             .74

DILUTED EPS:

Income (loss) from continuing operations attributed to common shareholders

$            56,150

$         44,314

$    100,464

$           166,635

$         44,314

$    210,949

   Add: Effect of reallocating undistributed earnings of unvested shareholders

5

6

11

19

6

25

Adjusted income (loss) from continuing operations attributed to common shareholders

$            56,155

$         44,320

$     100,475

$            166,654

$         44,320

$     210,974

Income (loss) from discontinued operations

$              4,005

$                   -

$         4,005

$                4,488

$                   -

$         4,488

   Weighted-average number of shares outstanding-basic

292,621

-

292,621

292,613

-

292,613

Add: dilutive effect of potential common shares

2,384

-

2,384

2,740

-

2,740

   Weighted-average number of diluted shares outstanding

295,005

-

295,005

295,353

-

295,353

     Diluted from continuing operations

$                  .19

$               .15

$             .34

$                    .56

$               .15

$             .71

     Diluted from discontinued operations

.01

-

.01

.02

-

.02

Total Diluted

$                  .20

$               .15

$             .35

$                    .58

$               .15

$             .73

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) ITEMS EXCLUDING CERTAIN NON-CASH CHARGES
AND OTHER NON-OPERATIONAL ITEMS (NON-GAAP)-REVISED

(Unaudited)

Charges and Non-Operational

As adjusted

(In thousands, except per share amounts)

Actuals

Items

(Non-GAAP)

As reported

Three Months Ended September 30, 2014

Income (loss) from continuing operations, net of tax

$   57,426

$         (59,304)

$   116,730

Diluted earnings (losses) per share from continuing operations

$       0.19

$             (0.20)

$         0.39

Charges and Non-Operational

As adjusted

(In thousands, except per share amounts)

Actuals

Items

(Non-GAAP)

Adjustments

Three Months Ended September 30, 2014

Income (loss) from continuing operations, net of tax

$  45,004

$             45,004

$              -

Diluted earnings (losses) per share from continuing operations

$      0.15

$                 0.15

$              -

Charges and Non-Operational

As adjusted

(In thousands, except per share amounts)

Actuals

Items

(Non-GAAP)

Revised

Three Months Ended September 30, 2014

Income (loss) from continuing operations, net of tax

$ 102,430

$            (14,300)

$   116,730

Diluted earnings (losses) per share from continuing operations

$       0.34

$                (0.05)

$         0.39

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SCHEDULE OF NON-CASH CHARGES AND OTHER NON-OPERATIONAL ITEMS (NON-GAAP)-REVISED

(Unaudited)

Three Months Ended September 30, 2014

As Reported

Adjustments

Revised

Per Diluted

Per Diluted

Per Diluted

(In thousands, except per share amounts)

2014

Share

2014

Share

2014

Share

           Transaction expenses (1)

$ 13,062

$ .04

$           -

$          -

$ 13,062

.04

           Sale of Alaska E&P business (2)

(17,023)

(.06)

-

-

(17,023)

(.06)

           Other non-operational items (3)

-

-

-

-

-

-

           Restructuring tax charge (4)

63,265

.22

(45,004)

(.15)

18,261

.07

Total Adjustments, net of tax

$ 59,304

$ .20

$ (45,004)

$ 14,300

.05

Weighted-average number of shares outstanding - diluted

295,005

295,005

295,005

(1) Represents expenses attributable to pending transaction with C&J Services, net of tax of $3.9 million.

(2) Represents the gain on the divestiture of our Alaska E&P business, net of tax of $5.1 million.

(3) Represents losses on the sale of non-core assets or in unconsolidated businesses in the process of being divested, net of tax of $1.3 million.

(4) Represents a tax charge associated with the restructuring of our completion and production services entities in preparation for the transaction with C&J Services.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

(In thousands, except per share amounts)

2014

2013

2014

2014

2013

Revised

Revised

Revenues and other income:

   Operating revenues

$ 1,813,762

$ 1,551,593

$ 1,616,981

$ 5,020,361

$ 4,545,037

   Earnings (losses) from unconsolidated affiliates

(2,851)

(2,628)

(576)

(5,872)

1,627

   Investment income (loss)

2,189

1,229

7,066

10,235

95,471

      Total revenues and other income

1,813,100

1,550,194

1,623,471

5,024,724

4,642,135

Costs and other deductions:

   Direct costs

1,181,986

981,685

1,066,495

3,310,220

2,948,987

   General and administrative expenses

138,967

127,943

133,630

406,863

390,023

   Depreciation and amortization

286,581

273,444

282,820

851,528

809,019

   Interest expense

43,138

56,059

46,303

134,251

176,343

   Losses (gains) on sales and disposals of long-lived assets and other expense (income), net

(1,513)

3,266

16,504

16,467

27,245

   Impairments and other charges

-

242,241

-

-

287,241

      Total costs and other deductions

1,649,159

1,684,638

1,545,752

4,719,329

4,638,858

Income (loss) from continuing operations before income taxes

163,941

(134,444)

77,719

305,395

3,277

Income tax expense (benefit)

61,511

(44,684)

10,756

86,275

(28,798)

Subsidiary preferred stock dividend

-

750

1,234

1,984

2,250

Income (loss) from continuing operations, net of tax

102,430

(90,510)

65,729

217,136

29,825

Income (loss) from discontinued operations, net of tax

4,005

(14,430)

(1,032)

4,488

(34,292)

Net income (loss)

106,435

(104,940)

64,697

221,624

(4,467)

   Less: Net (income) loss attributable to noncontrolling interest

(387)

(441)

(253)

(1,213)

(6,154)

Net income (loss) attributable to Nabors

$ 106,048

$ (105,381)

$  64,444

$ 220,411

$ (10,621)

Earnings (losses) per share: (1)

   Basic from continuing operations

$         .34

$         (.30)

$        .21

$          .72

$           .08

   Basic from discontinued operations

.02

(.05)

-

.02

(.11)

   Basic

$         .36

$         (.35)

$        .21

$          .74

$         (.03)

   Diluted from continuing operations

$         .34

$         (.30)

$        .21

$          .71

$           .08

   Diluted from discontinued operations

.01

(.05)

-

.02

(.11)

   Diluted

$         .35

$         (.35)

$        .21

$          .73

$         (.03)

Weighted-average number of common shares outstanding: (1)

   Basic

292,621

295,076

297,984

292,613

293,837

   Diluted

295,005

295,076

300,981

295,353

296,208

Adjusted EBITDA (2)

$ 489,958

$ 439,337

$ 416,280

$ 1,297,406

$ 1,207,654

Adjusted income (loss) derived from operating activities (3)

$ 203,377

$ 165,893

$ 133,460

$    445,878

$    398,635

(1) See "Computation of Earnings (Losses) Per Share" included herein as a separate schedule.

(2) Adjusted EBITDA is computed by subtracting the sum of direct costs and general and administrative expenses from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. There are limitations inherent in using adjusted EBITDA as a measure of overall profitability because it excludes significant expense items. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted EBITDA and adjusted income (loss) derived from operating activities, because we believe that these financial measures accurately reflect our ongoing profitability. These amounts should not be used as a substitute for the amounts reported in accordance with GAAP. To compensate for the limitations in utilizing adjusted EBITDA as an operating measure, management also uses GAAP measures of performance, including income from continuing operations and net income, to evaluate performance, but only with respect to the Company as a whole and not on a segment basis. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

(3) Adjusted income (loss) derived from operating activities is computed by subtracting the sum of direct costs, general and administrative expenses and depreciation and amortization from the sum of Operating revenues and Earnings (losses) from unconsolidated affiliates. These amounts should not be used as a substitute for those amounts reported in accordance with GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income (loss) derived from operating activities, because it believes that these financial measures accurately reflect our ongoing profitability. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30,

June 30,

December 31,

(In thousands, except ratios)

2014

2014

2013

Revised

ASSETS

Current assets:

Cash and short-term investments

$        464,818

$       486,344

$        507,133

Accounts receivable, net

1,624,441

1,448,511

1,399,543

Assets held for sale

158,327

233,163

243,264

Other current assets

544,885

642,620

603,890

      Total current assets

2,792,471

2,810,638

2,753,830

Long-term investments and other receivables

2,568

2,724

3,236

Property, plant and equipment, net

9,016,508

8,832,966

8,597,813

Goodwill

512,203

512,897

512,964

Investment in unconsolidated affiliates

60,451

60,509

64,260

Other long-term assets

235,139

216,265

227,708

      Total assets

$  12,619,340

$ 12,435,999

$  12,159,811

LIABILITIES AND EQUITY

Current liabilities:

Current debt

$              196

$             207

$         10,185

Other current liabilities

1,415,385

1,319,379

1,301,239

      Total current liabilities

1,415,581

1,319,586

1,311,424

Long-term debt

4,255,136

3,956,290

3,904,117

Other long-term liabilities

1,075,389

1,078,201

893,905

      Total liabilities

6,746,106

6,354,077

6,109,446

Subsidiary preferred stock (1)

-

-

69,188

Equity:

Shareholders' equity

5,862,873

6,071,426

5,969,086

Noncontrolling interest

10,361

10,496

12,091

      Total equity

5,873,234

6,081,922

5,981,177

      Total liabilities and equity

$  12,619,340

$  12,435,999

$ 12,159,811

(1)         Represents subsidiary preferred stock from acquisition in September 2010.  All 75,000 outstanding shares were redeemed in June 2014.