Nabors Industries (NYSE:NBR) reported third-quarter 2026 adjusted EBITDA of $246 million, exceeding the company’s expectations as improved international drilling margins, U.S. Lower 48 activity and growth in Drilling Solutions supported results. The company generated $75 million in consolidated adjusted free cash flow during the quarter and redeemed $100 million of debt.
Chairman, President and Chief Executive Officer Tony Petrello said operational performance drove higher cash flow and additional deleveraging, while the company also advanced projects in geothermal drilling, technology and international rig deployments.
Total revenue increased 7% sequentially, while adjusted EBITDA rose $24 million, or 11%, according to Chief Financial Officer Miguel Rodriguez. EBITDA margin expanded about 100 basis points to 28.2%, and the company converted 42% of sequential revenue growth into EBITDA.
International drilling sets margin record
International drilling EBITDA increased $15 million, or 12%, sequentially, as average daily gross margin rose by more than $1,500 to a record above $19,000. The segment exited the quarter with 96 rigs operating.
Nabors added activity through SANAD, its Saudi Arabian joint venture with Saudi Aramco, a redeployed U.S. rig in Argentina and a geothermal deployment in Indonesia. The company also renewed contracts in Algeria, Kazakhstan and Oman, adding 20 rig years to its international backlog.
Saudi Arabian activity remains a near-term headwind. Petrello said industrywide suspension notices have affected as many as 15 land rigs, including five SANAD rigs. SANAD ended the third quarter with 56 rigs working in the Kingdom, but three have since suspended operations and two more are scheduled for suspension in the fourth quarter.
The scheduled fourth-quarter deployment of SANAD’s 18th newbuild rig is expected to partly offset the suspensions. Nabors expects SANAD to end 2026 with 52 rigs working, representing a 27% market share. During the question-and-answer session, Petrello said the fifth tranche of the SANAD newbuild program had been signed and released.
Rodriguez said the Saudi suspensions and the delay of the 19th newbuild rig into the first quarter of 2027 are expected to reduce fourth-quarter adjusted free cash flow by $5 million to $6 million, net of lower operating expenses and capital spending. Nabors nevertheless expects international daily gross margin to rise to about $19,500 in the fourth quarter.
Argentina and Venezuela provide growth opportunities
In Argentina, Nabors began operating its 14th owned rig during the quarter after redeploying an idle U.S. unit, and it also manages one client-owned rig. Petrello said the company holds a 33% market share in the country and is evaluating 10 additional opportunities.
The company’s Drilling Solutions business is expanding alongside its rig operations in Argentina, where managed pressure drilling technology has gained adoption in the Vaca Muerta. Nabors recently received a multi-well award for its FracView and DrillView logging-while-drilling solutions.
Nabors also received a multiyear drilling contract in Venezuela and is bringing an idle U.S. rig back online to meet the customer’s schedule. Rodriguez said that rig is expected to start early next year. The company has five idle rigs in Venezuela that it believes can be restarted relatively quickly as customer programs develop.
Petrello said Nabors is tracking more than 20 additional rig opportunities in Venezuela. Rodriguez added that the company expects Venezuelan operations to be accretive to its reported international gross margin.
Lower 48 activity and pricing improve
U.S. drilling EBITDA increased $5 million, or 6%, sequentially. Nabors added three Lower 48 rigs during the third quarter, exited with 74 operating rigs and reported average daily gross margin above $14,000, up $232 from the prior quarter.
Average daily revenue in the Lower 48 rose by more than $1,200 to about $34,800, supported by stronger pricing for high-specification rigs and day-rate adjustments to recover higher field wages. Rodriguez said leading-edge daily revenue had reached the mid-$30,000 range.
Nearly half of Nabors’ Lower 48 rigs had at least six months remaining under contract at quarter-end, and the company expects that proportion to reach about 55% by year-end. Nearly 75% of the company’s working Lower 48 rigs served publicly traded operators at the end of the quarter.
For the fourth quarter, Nabors expects average Lower 48 rig count of about 75 and an exit rate of 76 to 77 rigs. Daily adjusted gross margin is projected at $14,500 to $14,700. Petrello said the company expects to reach roughly 95% utilization of rigs that can be reactivated with maintenance-level capital spending.
Beyond that level, Rodriguez said an additional 10 to 12 rigs would require more substantial investment of roughly $4 million to $8 million per rig. Nabors would seek at least three-year contract terms to support those reactivations.
Technology growth, cash flow and 2027 outlook
Drilling Solutions EBITDA reached $44 million, up 10% sequentially, driven by wider adoption of performance software, downhole services, managed pressure drilling and casing-running services. The segment converted 72% of incremental revenue into EBITDA and approximately 88% of EBITDA into cash after capital expenditures, according to Rodriguez.
Nabors delivered four Canrig TITAN automated rig-floor wrenches during the quarter and said backlog for the equipment exceeded 20 units. The company also expanded its geothermal activity, with two rigs currently engaged in geothermal work, including one drilling Quaise Energy’s Project Obsidian in Oregon and another supporting Sage Geosystems.
Third-quarter capital expenditures totaled $141 million. Nabors expects fourth-quarter capital spending of $250 million to $260 million and full-year spending of $710 million to $720 million, including $295 million to $305 million related to SANAD newbuilds.
The company raised its full-year adjusted free cash flow outlook to $100 million to $110 million and expects full-year EBITDA of approximately $930 million. Rodriguez said this implied an annualized EBITDA run rate of $1 billion entering 2027. Nabors reduced net leverage to 1.7 times and said its target remains approximately one times.
About Nabors Industries (NYSE:NBR)
Nabors Industries Ltd. is a global provider of drilling and well-construction services to the oil and gas industry. The company operates land-based drilling rigs and offshore drilling units, serving exploration and production companies developing conventional and unconventional oil and natural gas resources.
Its services and products include contract drilling, directional drilling, measurement-while-drilling and logging-while-drilling technologies, wellbore placement, and drilling-related equipment.
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