Nabors Industries Ltd. announced today that it is reducing its capital expenditures budget by $75 million and suspending its dividend in light of the current deteriorating market conditions — a combination of the novel coronavirus outbreak and the ongoing dispute between two of the largest oil exporters.
In response to current market and industry conditions, Nabors has implemented measures aimed at mitigating the impact on its financial results, including:
- An additional $75 million reduction in planned 2020 capital expenditures. The new reduced target is $275 million to $295 million, compared to $350 million to $370 million previously.
- A recommendation by management to the board of directors to suspend the dividend on Nabors' common shares.
- Salary reductions totaling 20% each for the CEO and CFO, as well as a 20% reduction in the annual retainer paid to non-employee members of the board.
- Salary reductions of 10% for U.S., corporate and expatriate employees with base salaries exceeding $100,000.
The company is also actively reviewing its organizational structure and taking additional steps to further streamline its operations, all with the view of improving liquidity while still retaining the ability to deliver safe and outstanding performance to our customers.
"The safety of our employees remains our top priority. In the face of COVID-19, we have implemented several measures throughout our operations globally to protect our employees and to mitigate operational impact," Anthony G. Petrello, Nabors' chairman, CEO and president, said in a statement. "Additionally, the industry has experienced a significant drop in oil prices as consumption of hydrocarbons has fallen precipitously. As a result, many E&P operators are implementing activity reductions in the U.S. Lower 48, in excess of the cuts they had previously announced for 2020. Internationally, activity is expected to hold up better, although we could experience disruptions from the effect of government actions aimed at containing the virus. Given the expected deterioration in our activity, triggered by the steep drop in oil prices, as well as the uncertain duration and severity of the virus outbreak, we have already taken several actions to bolster our company's liquidity."
Given the uncertainty in the current market conditions, primarily in the Lower 48, Nabors has withdrawn any previously-issued guidance for its full-year 2020 results. The company expects its first quarter 2020 results to fall somewhat below the guidance provided on its fourth quarter earnings conference call.
Petrello commented further, "The announced reactions from operators have been swift and substantial, and the market conditions we face are sure to be difficult. We are acting quickly and decisively. We remain committed to improving the company's capital structure this year even under the expected market conditions, and we are confident these announced measures will support that goal."
Nabors owns and operates one of the world's largest land-based drilling rig fleets and is a provider of offshore rigs in the U.S. and numerous international markets. Nabors also provides directional drilling services, performance software, and other innovative technologies for its own rig fleet and those of third parties.