NABORS INDUSTRIES LTD

CORRESP 1 filename1.htm

Nabors Industries Ltd. Crown House Second Floor 4 Par-La-Ville Road Hamilton, Bermuda HMO8

April 26, 2022

Via EDGAR

Ms. Wei Lu

Mr. Ethan Horowitz Division of Corporation Finance Securities and Exchange Commission 100 F Street N.E. Washington, D.C. 20549

Re:
Form 10-K for the Fiscal Year Ended December 31, 2021 Filed February 18, 2022 and Form 8-K filed February 8, 2022 File No. 001-32657

Dear Ms. Lu and Mr. Horowitz:

We confirm receipt by Nabors Industries Ltd. (the “Company”), a Bermuda exempted company, of the comment letter dated April 12, 2022 of the Commission with respect to the above-referenced Form 10-K for the Fiscal Year Ended December 31, 2021 and Form 8-K filed February 8, 2022 (the “Letter”).

To assist in the Staff’s review of the Company’s responses, we precede each response with the text (in bold type) of the comment as stated in your letter. The Company believes that it has replied to your comments in full.

Form 8-K filed February 8, 2022

Exhibit 99.1

Segment Reporting, page 3

We note your response to prior comment 2. As Daily adjusted gross margin appears to be a non-GAAP measure presented on a segment basis, tell us how you considered reconciling it to the measure used by management to evaluate segment performance, Adjusted operating income (loss), as the most directly comparable GAAP-basis measure.

Thank you for your comment. When responding to your previous letter dated March 24, 2022, we considered whether to reconcile Adjusted Gross Margin by segment to Operating revenues or to Adjusted operating income (loss). We elected to reconcile it to Operating revenues by segment, as it seemed to be the most direct way to calculate the number from line items used in our income statement. However, because Adjusted operating income (loss) by segment is the measure used by management to evaluate segment performance, we will reconcile Adjusted Gross Margin by segment to Adjusted operating income (loss) by segment. Please see Exhibit 1 for an example of this reconciliation table.

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Reconciliation of Non-GAAP Financial Measures to Income (Loss) from Continuing Operations Before Income Taxes, page 5

We note the proposed revisions provided in your response to prior comment 3. It appears that Adjusted EBITDA presented on a consolidated basis should be reconciled to GAAP basis net income (loss) as presented in your Statement of Comprehensive Income (Loss) and Adjusted gross margin presented on a consolidated basis should be reconciled to a fully burdened, GAAP-basis measure of gross margin. Please revise your disclosure to comply with Item 10(e)(1)(i)(B) of Regulation S-K. Also, see question 103.02 of the Compliance & Disclosure Interpretations regarding Non-GAAP Financial Measures. This comment also applies to your response to prior comment 5.

Thank you for your comment. We will make the requested revisions in future filings. Please see Exhibit 2 for examples of these reconciliation tables.

Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities, page 7

We note your proposed revision in response to prior comment 4. Please tell us if your reference to cash flow available for paying down debt is consistent with your mandatory debt service requirements and whether you consider the payment of dividends to shareholders to be a non-discretionary expenditure.

Thank you for your comment. Our reference to “cash flow available for paying down debt” is cash flow that is available to pay down the principal amount of our debt after we have made all mandatory debt service payments, so we believe it is consistent. We do not consider the payment of dividends to shareholders to be a non-discretionary expenditure.

We acknowledge that we are responsible for the adequacy and accuracy of the disclosures in each of our filings.

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In the event the Staff has additional questions or comments, please contact the undersigned at (281) 775-8166, or you may contact Jim Ball at 212-530-5515 of Milbank LLP.

Sincerely yours,
/s/ William Restrepo
William Restrepo
Chief Financial Officer
Nabors Corporate Services, Inc.

cc:
Anthony G. Petrello
R. Clark Wood
Milbank LLP:
James H. Ball, Jr.

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Exhibit 1

NABORS INDUSTRIES LTD. AND SUBSIDIARIES RECONCILIATION OF SEGMENTS' ADJUSTED GROSS MARGIN TO SEGMENTS' ADJUSTED OPERATING INCOME (Unaudited)

	Three Months Ended						Year Ended
	December 31,				September 30,		December 31,
(In thousands)	2021		2020		2021		2021		2020
Lower 48 - U.S. Drilling
Adjusted operating income	$ (25,474	)	$ (31,787	)	$ (30,783	)	$ (119,000	)	$ (133,672	)
Plus: General and administrative expenses	4,610		4,169		4,606		17,892		17,186
Plus: Research and engineering	1,064		579		1,296		3,736		2,515
GAAP Gross Margin	(19,800	)	(27,039	)	(24,881	)	(97,372	)	(113,971	)
Plus: Depreciation and amortization	68,994		74,123		68,603		273,636		337,758
Adjusted gross margin	$ 49,194		$ 47,084		$ 43,722		$ 176,264		$ 223,787
Other - U.S. Drilling
Adjusted operating income	$ 12,887		$ 5,572		$ 11,083		$ 42,508		$ 37,496
Plus: General and administrative expenses	515		714		531		2,119		2,533
Plus: Research and engineering	105		73		120		409		318
GAAP Gross Margin	13,507		6,359		11,734		45,036		40,347
Plus: Depreciation and amortization	12,842		14,254		13,229		52,807		60,568
Adjusted gross margin	$ 26,349		$ 20,613		$ 24,963		$ 97,843		$ 100,915
U.S. Drilling
Adjusted operating income	$ (12,587	)	$ (26,215	)	$ (19,700	)	$ (76,492	)	$ (96,176	)
Plus: General and administrative expenses	5,125		4,883		5,137		20,011		19,719
Plus: Research and engineering	1,169		652		1,416		4,145		2,833
GAAP Gross Margin	(6,293	)	(20,680	)	(13,147	)	(52,336	)	(73,624	)
Plus: Depreciation and amortization	81,836		88,377		81,832		326,443		398,326
Adjusted gross margin	$ 75,543		$ 67,697		$ 68,685		$ 274,107		$ 324,702
Canada Drilling
Adjusted operating income	$ 223		$ (2,501	)	$ 1,371		$ 2,893		$ (11,766	)
Plus: General and administrative expenses	174		601		493		1,711		2,729
Plus: Research and engineering	-		35		25		115		112
GAAP Gross Margin	397		(1,865	)	1,889		4,719		(8,925	)
Plus: Depreciation and amortization	-		6,002		236		11,604		24,784
Adjusted gross margin	$ 397		$ 4,137		$ 2,125		$ 16,323		$ 15,859
International Drilling
Adjusted operating income	$ (5,749	)	$ (35,462	)	$ (7,297	)	$ (40,117	)	$ (56,205	)
Plus: General and administrative expenses	12,057		11,891		10,909		44,995		46,093
Plus: Research and engineering	1,359		1,300		1,520		5,560		5,444
GAAP Gross Margin	7,667		(22,271	)	5,132		10,438		(4,668	)
Plus: Depreciation and amortization	78,917		99,952		83,508		323,429		377,599
Adjusted gross margin	$ 86,584		$ 77,681		$ 88,640		$ 333,867		$ 372,931

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Exhibit 2

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS)

(Unaudited)

| | Three
Months Ended | | | | | | Year
Ended | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | December
31, | | | | September
30, | | December
31, | | | |
| (In
thousands) | 2021 | | 2020 | | 2021 | | 2021 | | 2020 | |
| Net
income (loss) | $ (109,263 | ) | $ (103,879 | ) | $ (115,722 | ) | $ (543,690 | ) | $ (762,846 | ) |
| (Income)
loss from discontinued operations, net of tax | (13 | ) | (55 | ) | 20 | | (20 | ) | (7 | ) |
| Income
(loss) from continuing operations, net of tax | (109,276 | ) | (103,934 | ) | (115,702 | ) | (543,710 | ) | (762,853 | ) |
| Income
tax expense (benefit) | 18,393 | | 38,842 | | 2,784 | | 55,621 | | 57,286 | |
| Income
(loss) from continuing operations before income taxes | (90,883 | ) | (65,092 | ) | (112,918 | ) | (488,089 | ) | (705,567 | ) |
| Investment
(income) loss | (156 | ) | (3,342 | ) | (200 | ) | (1,557 | ) | (1,438 | ) |
| Interest
expense | 44,570 | | 47,943 | | 42,217 | | 171,476 | | 206,274 | |
| Impairments
and other charges | 1,312 | | 71,328 | | 3,068 | | 66,731 | | 410,631 | |
| Other,
net | 8,858 | | (151,377 | ) | 19,690 | | 39,998 | | (199,707 | ) |
| Adjusted
operating income (loss) | (36,299 | ) | (100,540 | ) | (48,143 | ) | (211,441 | ) | (289,807 | ) |
| Depreciation
and amortization | 167,955 | | 208,654 | | 173,375 | | 693,381 | | 853,699 | |
| Adjusted
EBITDA | $ 131,656 | | $ 108,114 | | $ 125,232 | | $ 481,940 | | $ 563,892 | |

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED GROSS MARGIN TO GAAP GROSS MARGIN

(Unaudited)

| | Three
Months Ended | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | December
31, | | | September
30, | | December
31, | | | | |
| (In
thousands) | 2021 | 2020 | | 2021 | | 2021 | | 2020 | | |
| Operating
revenues | $ 543,539 | $ | 443,396 | $ | 524,165 | $ | 2,017,548 | $ | 2,134,043 | |
| Less:
Direct operating costs | (347,238 | ) | (274,278 | ) | (336,538 | ) | (1,286,896 | ) | (1,333,073 | ) |
| Less:
Depreciation and amortization | (167,955 | ) | (208,654 | ) | (173,375 | ) | (693,381 | ) | (853,699 | ) |
| GAAP
Gross Margin | 28,346 | | (39,536 | ) | 14,252 | | 37,270 | | (52,728 | ) |
| Plus:
Depreciation and amortization | 167,955 | | 208,654 | | 173,375 | | 693,381 | | 853,699 | |
| Adjusted
gross margin | $ 196,301 | $ | 169,118 | $ | 187,627 | $ | 730,652 | $ | 800,971 | |

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