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Operator: Good day, and welcome to the Nabors Industries Ltd. First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. 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.

William Conroy: Good morning, everyone. Thank you for joining Nabors’ first quarter 2026 earnings conference call. Today, we will follow our customary format with Tony Petrello, our Chairman, President, and Chief Executive Officer, and Miguel Rodriguez, 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, the 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, Miguel, and me, are 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 adjusted free cash flow. All references to EBITDA made by either Tony or Miguel 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 adjusted 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.

Tony Petrello: Good morning, thank you for joining us to review our first quarter results. The quarter included several important operational and strategic milestones. I will highlight those today. I will begin with the situation in the Middle East and its effects on our business. Today, our rig footprint in the Gulf region consists of 53 rigs operating under our SANAD land drilling joint venture in Saudi Arabia, four rigs working in Oman, three rigs in Kuwait. We conduct large casing running operations in both Saudi Arabia and Abu Dhabi. Our Canrig subsidiary is also active across the region. It operates with manufacturing and repair facilities in Saudi Arabia and Dubai. Across the region, our staff number is approximately 7,000 including SANAD.

Today, we have maintained our pre-conflict operating tempo across each of these operations. Our clients in the region continue to follow through on planned activity. Importantly, they have not communicated any material change to their forward plans. The impact on our financial results so far has been limited. Miguel will address the financial implications in his remarks. Many of you have asked, whether Lower 48 operators have increased their activity in response to higher oil prices. First, oil futures are steeply backwardated. While supported for incremental production, forward pricing remains below current front-month levels. This tempers the near-term activity expectations. Second, changes in drilling plans require confidence in sustained pricing.

Given current volatility, it remains early for broad-based revisions to existing drilling programs. In the Middle East, approximately 7.5 million barrels a day of production was shut in according to the EIA. This total could actually increase in April. Restoring this shut-in production will require time, capital, and operational execution. As a result, supply disruptions in the Middle East may persist beyond the near term. This dynamic should provide underlying support for both commodity prices and activity levels in other regions including the United States. In short, we see tightening supply. We see durable demand. Markets will adjust. Let me now turn to our financial results for the quarter. Adjusted EBITDA totaled [inaudible]. Notwithstanding the financial consequences from the conflict, our performance was essentially in line with the expectations we outlined on our last earnings call.

This outcome reflects progress across our key strategic priorities: operational excellence in the Lower 48, measured growth in the international markets, technology that improves returns for our customers and for Nabors. We expect them to drive further improvement through the year. Let me turn to the market environment and our positioning. The oil market shifted sharply in early March as the hostilities began. Since then, near-month WTI has remained volatile around $90. The current oil market is more constructive than in 2025. However, operators have not broadly adjusted activity in response to these price levels. As I noted earlier, the futures curve remains backwardated. We remain aware of global supply and demand balances alongside inventory trends.

These trends may offer the opportunity for additional drilling activity which we are positioned to capture. Next, let me address Venezuela. We have five rigs in the country. While our fleet remains idle, we have maintained a small local staff. We have operated in the country since the 1940s. The resource base remains significant, and the long-term opportunity is substantial. Under the right circumstances, Venezuela presents a meaningful opportunity. Recently, a number of operators have expressed urgency to expand their operations in Venezuela. We are ready to support their activity. Discussions are underway to determine suitable commercial terms. We will structure these agreements to protect our capital in-country. Turning to the US market.

Operators are evaluating the global dynamics we discussed earlier. For the most part, large public operators are not moving quickly to increase capital spending even with higher oil prices. Resolution of the conflict along with a clear view of its impact on global supply would allow operators to adjust their plans with greater confidence. Since February, near-month WTI has moved more than 10% on seven trading days. This level of volatility complicates planning and capital allocation. Our approach in this market is to continue doing what we have been doing: deploy advanced technology that increases efficiency and improves operator EURs and returns; pair this with tight cost control and capital discipline. Turning to natural gas. Several factors are shaping its near-term outlook.

The conflict is affecting global LNG flows, with disruptions to exports through the Strait of Hormuz. This may increase LNG exports from the United States. Also, in the US, year over year, natural gas demand for electricity generation declined in 11 of the past 12 months. Renewables have displaced some gas-fired generation. These dynamics are reflected in current natural gas pricing. Over the longer term, US LNG exports and domestic consumption are expected to increase. Additional Gulf Coast LNG export capacity will come online, including projects such as Golden Pass, Port Arthur, and CP2. Data center power generation requirements continue to expand. These could add up to 6 Bcf a day of natural gas demand by 2030. In international markets, including the Middle East and Latin America, expanding gas development continues to support drilling activity.

In the Lower 48, gas-directed activity currently comprises more than 20% of our working rig count. We can respond quickly to increased demands across gas-producing basins. Next, I will share a few perspectives on Nabors’ current business. In the Lower 48, the momentum that started toward the end of 2025 has continued through the first quarter. We added four rigs during the first quarter and a total of eight rigs since November 2025. This progression was a positive surprise that brought our rig count to 66 at quarter end. Our count currently stands at 66. Since the beginning of the year, these incremental rigs have primarily come from public operators. They are spread across producing areas with four in the Permian, three in the Haynesville, one in the Eagle Ford.

We believe this diversity across basins is healthy. Turning to SANAD, the newbuild fleet in Saudi Arabia continues to expand. SANAD deployed the fifteenth newbuild during the first quarter. Four more new rigs are planned to commence working during 2026, bringing the newbuild total to 19. The twentieth should start up in early 2027 as planned. Notwithstanding the current conflict, SANAD has also resumed operations on one of its suspended rigs. The second is scheduled to start up late this quarter. These additions, both occurring in March, are a testament to the capability of our workforce in the kingdom. While conditions in the Middle East remain fluid, this level of activity reflects the customer’s commitment to its prior development plans.

Operators across the Eastern Hemisphere are advancing plans to expand activity. In Latin America, the activity improvement in Mexico continued in the quarter. Late in the first quarter, we restarted a rig there earlier than planned. That brings our total to four working. All of these are offshore platform rigs. They are large high-spec units with economics above the segment average. In Argentina, we started one rig in the first quarter as planned. We have another rig scheduled to work there in the third quarter. The second rig should bring our rig count in the country to 14. This further strengthens our position as the leading drilling contractor in Argentina. Now I will turn to the US market. Since the beginning of this calendar year, the Baker Hughes weekly Lower 48 land rig count has declined by three rigs.

Nabors’ rig count in this market has increased by four. To date, higher oil prices have had limited impact on overall market activity or our rig count. Over the same period, our return has moderated. Let me add some context on our Lower 48 performance. Our count began rising in December, supported by groundwork laid earlier in the year. This performance reflects our high-spec rigs, advanced technology, experienced crews, and strong field performance. We have also grown our rig count while maintaining pricing discipline. Looking ahead, we are increasing our forecast to reflect more rigs in the current quarter. We expect to maintain a higher level through the second half of the year. We also surveyed the expected drilling activity of the largest Lower 48 operators; the group accounted for approximately 44% of this market’s working rig count at the end of the quarter.

The first quarter data reflects announced M&A activity. The results provide useful insight into operator behavior. In aggregate, these operators reduced their rig count during the first quarter. This is consistent with broader market trends. Looking ahead, the group expects to add approximately 15 rigs through the end of the year. These additions are concentrated among two operators. Both have indicated they are responding to current market conditions. Beyond these operators, the overall sentiment generally favors incremental activity, though this tone is not expressed in expected rig counts. We continue to improve our ability to execute commercially and operationally. Now the survey shows Lower 48 industry utilization is headed higher. With this combination, we believe our rig pricing will increase progressively through 2026 and into 2027, reaching the mid-thirties.

I will now comment on the key drivers of our results. I will begin with our International Drilling segment. Notwithstanding disruptions in several markets, this business continues to expand. For perspective, since 2023, the Baker lower 48 rig count has declined by approximately 12%. Nabors’ international rig count increased by 16% over the same period. The rig count in markets where we operate was essentially flat during this time. We achieved our growth even as we wound down operations in several countries. SANAD also had rigs suspended and it elected not to renew certain contracts. This performance demonstrates the value of our geographically diversified portfolio of businesses. Today, we see additional prospects across the Middle East, Asia Pacific, and in Latin America.

In the Eastern Hemisphere, we see approximately 20 opportunities in markets where we operate or which we consider attractive. Beyond Venezuela, where I mentioned prospects to resume operations are improving, we see additional opportunities across Latin America, primarily in Argentina with a smaller number in Colombia. We prioritize operations that utilize our innovative technology, offer multiyear term contracts, and generate attractive financial returns. In Saudi Arabia, in addition to the planned rig starts through early 2027, SANAD is advancing discussions with the client for the next group of five newbuild rigs. We expect to conclude these discussions in the coming months. That group will bring the total number of newbuilds to 25. Turning to performance in the US.

On our previous earnings conference call, we suggested our daily gross margin in the Lower 48 was stabilizing. That proved to be the case in the first quarter. For the second quarter, we expect a modest uptick. Commercial and operational performance support this outlook. We maintain pricing integrity and control costs. Our rig count is outperforming the industry. We are well positioned to capitalize on future opportunities to add to our working rig fleet. Let me briefly update you on our high-end rigs including the PaceX Ultra. The PaceX Ultra rig established the benchmark as the industry’s first rig with a 10k PSI mud system. It is also equipped with expanded setback, upgraded rig components. The first unit continues to work for a catalyst in South Texas.

It delivers the high performance that our client and we expected. We have agreements to deploy two more PaceX Ultras later this year, and we are in discussions with multiple operators to upgrade specific rig capabilities. These upgrades enable them to drill increasingly challenging wells. The PaceX Ultra’s economics reflect the rig’s market-leading capabilities and value proposition. Including the NDS content, on these rigs daily revenue is well above the $40,000 mark, and they work on term contracts. These developments reinforce the value of our rigs. Our solutions contribute directly to customer performance while generating attractive returns for Nabors. Next, let me discuss our technology and innovation. We include a full drilling automation package from NDS on our PaceX Ultra rig and also include our integrated MPD package.

This combination positions the PaceX Ultra as the most capable drilling system in the US market. We are committed to expanding NDS’ services globally, particularly among the NOC customer base. During this quarter, we had modest international growth. We believe there is a strong appetite as operators follow the US by prioritizing efficiency performance gains. I will conclude with our capital structure. To be clear, our highest priority remains debt reduction. On top of the substantial progress we made in 2025, during the first quarter we redeemed the balance of the notes due in 2028. This action reduces future interest expense and supports free cash flow generation. As Miguel will detail, we outperformed our free cash flow expectation for the first quarter largely outside of SANAD.

This cash flow provides capacity to further reduce debt and strengthen the balance sheet. To summarize before turning over to Miguel, the first quarter brought unexpected volatility to the global energy industry. Our diversified portfolio across businesses and geographies helps us manage that volatility and continue to perform. Now let me turn to Miguel to discuss our financial results in detail.

Miguel Rodriguez: Thank you, Tony, and good morning, everyone. Before turning to our results, I want to briefly address the evolving market backdrop, particularly in light of the Middle East conflict. From an operational perspective, our business in the region has remained stable. We continue to operate in Saudi Arabia, Kuwait, Oman, and the Emirates without disruption, maintaining a consistent cadence of activity. As planned, our SANAD joint venture added rigs in Saudi Arabia during the first quarter. That said, the conflict did introduce some operational friction during the quarter, primarily affecting logistics, supply chain, and crew rotations. In the US, our customers, especially the majors and public E&Ps, have remained disciplined in their approach to activity levels.

We are encouraged by the progress of our rig additions in the Lower 48. These gains reflect strong commercial execution from the fourth quarter rather than a broad-based shift in customer behavior. While we believe the Lower 48 market is showing early signs of improvement, overall activity levels have not yet changed meaningfully. With that context, I will review our first quarter performance and outline our guidance for the second quarter. I will then conclude with updates on capital allocation, adjusted free cash flow, and capital structure. Now turning to the first quarter. Our consolidated revenue was $784 million. The sequential decline was driven by two main factors. First, the expected seasonal reduction in our Rig Technologies segment reflecting lower capital equipment deliveries and parts sales.

This was compounded by approximately $3 million of logistics disruptions in the Middle East. Second, the previously announced step down in dayrate for our marquee rig in the Gulf of Mexico, which transitioned to a workover rate at the start of the year. Consolidated EBITDA was [inaudible], representing an EBITDA margin of 26.1%, down 164 basis points sequentially. The decline was driven primarily by our International Drilling and Rig Technologies segments. Importantly, our EBITDA was consistent with the expectations we communicated during our previous earnings call. Our EBITDA results include approximately $3.5 million of adverse impact related to the Middle East conflict across our International Drilling and Rig Technologies segments. Now I will provide you with details for each of the segment results.

International Drilling revenue was $419 million, a decline of $4 million or 1% sequentially. EBITDA was $121 million, decreasing $10 million or 7.6% quarter over quarter, yielding an EBITDA margin of 28.9%. The sequential decline in EBITDA reflects anticipated labor costs in Saudi Arabia associated with Ramadan and the Eid holiday, in addition to time-related impacts from the unplanned transition of two rigs moving from oil-directed to gas-directed drilling. Results were also impacted by the previously announced conclusion of certain short-term high-margin activities in the Eastern Hemisphere during the fourth quarter, continued activity disruptions in Colombia, and incremental costs related to the Middle East conflict. Our average daily gross margin was $16,880, which fell below our guidance range.

This was driven by several factors: the aforementioned transition of two SANAD JV rigs from oil to gas drilling, which required contractor inspections and acceptance procedures temporarily disrupting the planned drilling schedules. While strategically beneficial, these transitions weighed on our first quarter results; operational challenges related to the Middle East conflict including impacts on logistics, supply chain, and crew rotations, resulting in a shortfall of approximately $2 million; and the continuation of activity disruptions in Colombia combined with the adverse impact of a stronger Colombian peso weighing on our cost structure. Average rig count for the quarter was 92.6, slightly above the high end of our guidance range. Our exit rig count was 93 rigs.

The fifteenth newbuild rig in Saudi Arabia, the resumption of one previously suspended rig also in the kingdom, the redeployment of one rig in Argentina, and the earlier-than-planned reactivation of an offshore platform rig in Mexico late in the quarter. These additions were partially offset by the previously announced roll-off of three very low-margin workover jobs in Saudi Arabia, which SANAD elected not to renew for economic reasons, and a small number of contract expirations in other international markets during the quarter. Moving on to US Drilling. Revenue was $241 million, essentially flat sequentially. EBITDA was $88 million, representing a margin of 36.5%. EBITDA exceeded our guidance, driven by stronger-than-expected activity in the Lower 48.

Alaska and offshore results were in line with expectations. Looking specifically at the Lower 48, revenue was $192 million, an increase of $11 million, up 5.9% sequentially reflecting higher activity. Average rig count increased by 5.5 to 65.3 rigs, above the top of our guidance range. During the quarter, we added rigs across several basins. The continued robust progress in our rig additions reflects strong coordination between our commercial and operations teams, combined with pricing discipline, excellent service quality, and rigorous execution, which all have been well supported by our high-quality customer portfolio. Currently, we have 66 rigs working. Average daily revenue declined to $32,650, reflecting some repricing as rigs rolled onto new contracts.

Leading edge daily revenue remains in the low-$30,000 range. Average daily margin was $13,177, in line with our expectations. Turning to Alaska and US offshore. On a combined basis, revenue was $49 million; EBITDA was $17 million, a decline of $9 million sequentially with EBITDA margin of 34.7%. These results were in line with our guidance and primarily reflect changes in the work scope and mix. Now turning to Drilling Solutions. NDS revenue was $106 million, largely flat sequentially. EBITDA was $39 million resulting in a margin of 36.4%. These results were in line with our guidance, reflecting growth in our international markets offset by a modest decline in the US from third-party rigs. Importantly, the segment converted approximately 94% of EBITDA to free cash flow during the quarter, a new record and underscoring its low capital intensity.

Now on to Rig Technologies. Revenue was $27 million, down $11 million sequentially. EBITDA was approximately $5 million, a decrease of $4 million from the prior quarter and below our guidance. The sequential decline was expected following strong year-end sales in the prior quarter. EBITDA was further impacted by parts delivery delays related to the Middle East conflict, representing approximately $1.5 million or roughly 50% incrementals. Turning to the second quarter, our EBITDA guidance assumes $6 million to $8 million impact considering that the inefficiencies in the Middle East will persist through the quarter across all segments, but primarily within International Drilling. In International Drilling, we expect average rig count to range from 93 to 95 rigs.

This reflects the addition of two rigs in Saudi Arabia including the commencement of the sixteenth newbuild rig and the redeployment of a second rig previously suspended, as well as the contribution from rigs that commenced activity in Q1. Average daily gross margin is expected to improve to a range of $17,400 to $17,500. This increase reflects the benefit of the incremental rigs and a full recovery from the first-quarter impacts related to Ramadan and Eid, along with a return to more stable drilling activity. Our outlook, however, does not demonstrate the full earnings power of our international franchise, as it incorporates the estimated impact from inefficiencies related to the Middle East conflict. While we remain cautious regarding the evolving situation in the region, the quality of our fleet, combined with our continued superior execution and performance, positions us well for a strong second half of the year.

Accordingly, we expect to deliver full-year segment results fairly in line with our full-year guidance. Turning to US Drilling. We expect the average Lower 48 rig count to increase to a range of 67 to 68 rigs. This includes some level of churn, albeit at a much reduced level compared to prior quarters. Daily adjusted gross margin for the second quarter is expected to average approximately $13,300, a modest sequential improvement driven by pricing. While the overall market environment remains somewhat constrained, we see targeted opportunities to add our rigs. This is driven by our strong and disciplined operational and commercial execution combined with our solid customer portfolio. We will continue to evaluate incremental opportunities based on asset availability, capital requirements, and crew capacity.

Therefore, we are updating our activity outlook for the Lower 48 drilling business with an improved full-year outlook. We currently expect to exit the second quarter with approximately 69 rigs and to maintain activity at or near that level through the remainder of the year. At these utilization levels, we expect our pricing to trend higher over time, moving from the low-$30,000 range to reach the mid-$30,000s as we progress through this year and into 2027. For Alaska and US offshore combined, we expect EBITDA of approximately $15 million, reflecting the conclusion of an offshore O&M contract and planned maintenance for one of our rigs, which is also offshore. Over the medium to long term, we expect strong operations in Alaska. Drilling Solutions EBITDA is expected to be approximately $39 million, which is in line with the first quarter.

Finally, Rig Technologies EBITDA is expected to be approximately $3 million. Next, I will discuss our capital allocation, adjusted free cash flow, and liquidity. First-quarter capital expenditures totaled $159 million, below our guidance range, mainly due to timing shifts in the SANAD newbuild milestones. Our Q1 CapEx included $72 million related to the in-kingdom newbuild program in Saudi Arabia. Total capital spending was closely in line with the fourth quarter, which amounted to $158 million including $78 million of newbuild-related spend. Looking ahead, we will continue our disciplined and flexible approach to capital investments. For the second quarter, we anticipate capital expenditures in the range of $180 million to $190 million, including $75 million to $80 million for the SANAD newbuild program.

For the full year, we expect capital expenditures to remain in line with our prior outlook of $730 million to $760 million, including $360 million to $380 million for SANAD newbuilds. However, the timing and level of spend remains subject to market conditions and project pace. The cadence of the SANAD newbuild milestones may shift between quarters. Potential activity above our current guidance in the US will be evaluated carefully in the context of market visibility, asset readiness, and requirements, overall return and funding thresholds, and contract term. We remain firmly committed to managing capital spend at or below our guided range. Turning to free cash flow. During the first quarter, Nabors consumed $48 million of consolidated adjusted free cash flow.

We exceeded our midpoint guidance range by more than $35 million. Importantly, free cash flow outside of SANAD was nearly breakeven, representing a meaningful outperformance relative to our expectations. This beat was mainly driven by a better-than-expected working capital progression and capital expenditures below plan levels. While this free cash flow outside of SANAD may be modest in absolute terms, it marks a very solid result, given that our first quarter is typically the most cash-intensive period of the year driven by payments of cash interest, property taxes, and annual bonuses, among others. This distinction in the origin of cash is important, as free cash flow generated outside of the SANAD JV is available to Nabors for debt service and other corporate purposes.

For the second quarter, we expect to generate approximately $10 million of consolidated adjusted free cash flow with SANAD consuming approximately $10 million. Based on the continued momentum in our Lower 48 business, a constructive outlook for our international operations, and the compounding effect of our capital discipline, we are well positioned to exceed our full-year guidance. Finally, I would like to make a few comments regarding our continued focus on our capital structure. During the first quarter, we redeemed the remaining $379 million of senior guaranteed notes maturing in 2028, extending our nearest maturity to June 2029 and leaving a very manageable $250 million maturity at that time. We remain focused on further strengthening our balance sheet and capital structure with an objective of reducing net debt leverage to approximately one time over the long term.

I will provide updates as we progress towards this goal. With that, I will turn the call back to Tony.

Tony Petrello: Thank you, Miguel. I will close with a few points. First, we continue to support our clients in the Middle East even as the operating environment has become significantly more challenging. We have maintained operational continuity and mitigated risk with strong management. In Saudi Arabia specifically, our SANAD JV remains on track for growth. The newbuild deployment schedule is unchanged. Discussions for the fifth tranche of new rigs are progressing. Each tranche is expected to generate more than $60 million in annual EBITDA. This program represents a significant, differentiated, long-term growth opportunity in our industry. Second, in the Lower 48, strong performance has resulted in growth in our rig count as well as free cash flow.

Customers continue to select our high-spec rigs and integrated NDS solutions to improve both performance and returns. We expect to deliver further progress through the year. Third, our free cash flow reflects disciplined operations across the business. We are firmly committed to using free cash flow to reduce debt. The message today is clear. Nabors is a stronger company. We deliver. Returns are improving. The business is more resilient. We are creating value in Saudi Arabia and across our international franchise. We are expanding technology-driven earnings and we are continuing to improve the financial quality of the business. There is more work to do, but we are on the right path and we are confident in the value creation ahead. Thank you for your time this morning.

We will now open the call for questions.

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Operator: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. The first question comes from Daniel Kutz with Morgan Stanley. Please go ahead.

Daniel Kutz: Hey, thanks a lot. Good morning.

Unknown Speaker: Morning, Doug.

Daniel Kutz: So I wanted to ask, with the US Lower 48 rig count where you are at today, about 66 rigs, that is up from a low of just under 60, and then you have guided to go to 69 in the second half of this year. Can you talk about how, for the rigs that you have reactivated or are planning on reactivating so far, some of the mobilization or restart costs and how that has translated to maybe some pricing upside with customers? But perhaps more importantly, what is the Nabors Lower 48 supply stack beyond that 69 active rigs planned for the second half? I think the last time that you were at that level was roughly two years ago. What would it take? What is Nabors’ appetite? What is the cost involved? What is the pricing you need to see to reactivate rigs beyond the current plans for the second half this year? Thanks.

Tony Petrello: Sure. So beyond the 69, I think I divide it into two categories. The first category, the next 11 or 12 rigs on top of that, that tranche is a relatively digestible number. And then beyond that, there is a second level, another roughly 15 rigs where the cost gets incrementally higher. So that is where we would do it. The first tranche, we are ready, able, willing to execute on both tranches. Obviously, there will be price increases associated with it, and we do not see that as being much of a problem.

Daniel Kutz: Got it. Fair enough. And then maybe just one on capital allocation. Could you remind us if you have put out, or what type of net leverage target you are targeting longer term or through cycle? Basically, what I am driving at is, is there a net leverage level where you might be comfortable—I feel like you have been very clear that using free cash to reduce debt is at the top of the capital allocation priority list, in addition to the SANAD newbuild program and maintenance, obviously. But at what point would you be comfortable—what kind of net leverage level or liquidity level would you be comfortable moving some other capital allocation priorities up the list, whether it is shareholder returns or accelerating PaceX Ultra upgrade investments or any other investments?

Maybe it is to upgrade and mobilize stacked US rigs for some international unconventional opportunities. Just how do you think about what the longer-term balance sheet and liquidity level that you would need to see to consider some other uses of capital, and what would potentially be on that list of capital uses? Thanks.

Miguel Rodriguez: Thank you, Dan. So, look, first of all, starting with the PaceX Ultra, we are in the process of deploying two additional Ultras during the remainder of the year. These rigs, I want to reiterate, are the best possible rigs we can think of in the entire Lower 48 market, not only for the technology aspects on the rig itself, but the full integration with the Nabors portfolio of services. The performance of the first rig has been outstanding, and I invite you to look at our press releases around the PaceX Ultra. We will continue to invest in this type of integrated technologies and rig as we continue to see interest from our key customers. That is number one. Number two, we have been clear that our medium- to long-term roadmap in terms of net leverage is around the one time.

This is a medium- to long-term objective. Tony and I remain very optimistic about our progress and the outlook not only in 2026, but into 2027 and beyond toward this goal. Once we get there or close, we will seriously contemplate other capital allocation initiatives. One of them will certainly be returns to shareholders, whether in the form of share buybacks or dividends, or both for that matter. But first of all, we believe our shareholders will get a better benefit by us continuing to reduce gross debt, and that remains the number one goal.

Daniel Kutz: Great. All makes sense. Thanks a lot. I will turn it back.

William Conroy: Take care.

Operator: The next question comes from Derek Podhaizer with Piper Sandler. Please go ahead.

Derek Podhaizer: Hey, good morning. So on the Lower 48, you added eight rigs since last year, sitting at 66. You expect to move to 69 by the end of the quarter. From there, you called for a steady rig count in the back half of the year, but now you are expecting private stack incremental rigs as the eight rigs you described were added primarily from the publics. You talked about the survey, two operators adding 15 rigs. In this setup, should we not see some upside to your second half rig count above the 69 versus being steady? Could you help us with the moving pieces here and how we should think about it?

Tony Petrello: Obviously, if all things click and there are no setbacks, there should be upside in the story here. We have made no secret of the fact that we have two additional rigs in process. But we are trying to be cautious as well because this market has the ability to turn on a dime. We do not want to get over our skis right now. We are comfortable changing the guidance that we have for the year to the 69 number, but we are not yet ready to move it to the next number.

Derek Podhaizer: That is fair. I appreciate that. Flipping over to Saudi, you have the newbuild program going. You are considering the next tranche to happen over the next couple of months. I am trying to think through your upside torque if Saudi were to add incremental activity once we get to a world post resolution here. It sounds like all your suspensions are going back to work. Is there any ability to accelerate the newbuild program from the initial cadence or is there potential for adding rigs into the JV that are outside of the country? Thoughts around upside torque if we see Saudi add incremental rigs in a post-conflict world?

Tony Petrello: Sure. First of all, let us put the whole thing in context of the Saudi Arabia market as a whole. There are currently 251 operating rigs in general—192 onshore, 59 offshore. Of the original suspensions, 82 were onshore, 37 were offshore, and there has been a resumption of 36 offshore and four onshore. We do not think all those suspended rigs are going to come back necessarily—maybe up to another 20 or so—and there is line of sight to at least 12. Given where we are and what our ramp has done so far, I think it is a very positive sign. Obviously, if the market demands incremental production, they will have to reassess their plans, and we are in a great position to be part of that, whether it is additional rigs within the Nabors existing fleet from other markets or not, or acceleration of a newbuild.

Probably acceleration of the newbuild program will not solve a short-term need. So my guess is, if it is going to come, it will come from Nabors’ other assets somewhere else. The other thing I would say is that our relative position there has really improved a lot. Our operating fleet is now really weighted to natural gas development. We remarked how we actually changed in the quarter some rigs from oil to gas. Ninety percent of our rigs are now directed at gas projects, just to give you an idea. Nabors’ share of the gas work is about 40%. Our overall market position is approximately 28%. We have to acknowledge Aramco’s role here; they have been steadfast in supporting SANAD throughout everything, including this very challenging environment.

Also part of the story there is the rollout of technology. NDS is now beginning to make inroads with performance products. For casing running, we are already a large player in the region with a substantial operation in the UAE. Globally, Nabors on land is now the third-largest casing running provider; in the US, we are the second-largest. In that region, we are a key player. When you look at the current environment and what may happen post this dispute in terms of the need for these NOCs to resume activity—and if you take into account the UAE’s recent announcement and aspirations to grow production—I think we are really well established in the region to take advantage of that. Does that make sense, or do you have any other color you wanted?

Derek Podhaizer: That was great. Appreciate all the color. Very helpful. I will turn it back.

Operator: Next question comes from Scott Gruber with Citigroup. Please go ahead.

Scott Gruber: Tony, encouraging comments on the activity volumes you have already seen and that are forthcoming, and also on the rate side in the US. I am curious around the drivers behind the rate inflation you see coming. I assume there is a component of market tightness, but is there also a component to getting compensated for these upgrades? Some color on that move into the mid-$30,000s—Is that mainly market or is it a combination of market and compensation for upgrades?

Tony Petrello: I think it is a combination of things. First, you have to remember over the past two years there has been a reduction in the overall number of marketable rigs. Second, well programs’ demands have increased, particularly among larger customers who want to do four- or five-mile laterals. That involves upgrading rigs and components. They recognize that means extra cost, therefore extra pricing as well. But those add-ons are very high-return. That plays to Nabors’ strength because our existing X rigs are more than capable of handling these large upgrades like the 10,000 PSI with expanded setback and other specs. The X rig was designed from day one to be that kind of rig, and the market has finally caught up to the X rig.

Basin dynamics also matter. In West Texas, there is tightening—churn has come down and pricing is directionally up. South Texas is improving strongly—churn is cut in half and market tightening is lifting pricing. North Dakota is slightly higher, driven by pockets of customers increasing rig count with some planned acceleration into 2027, so pricing is directionally up. East Texas is flat with churn persisting and utilization under pressure; pricing is about flat to slightly up, reflecting the gas story. The Northeast is steady and flat given pipeline constraints. Combine reduced available rig supply, higher operator capability demands, Nabors’ ability to add technology to rigs, and a greater focus on performance contracts to recognize the value we provide—put that together and it drives a path to increased pricing and better returns on capital.

You must exercise discipline and execute performance that justifies it. Those are the requirements to make it happen.

Scott Gruber: That makes sense. I appreciate that color. And did I hear correctly that Saudi did not renew a couple of contracts on a few workover rigs? If so, can you provide a bit more color there? It is a bit surprising in light of restart needs. Generally, what are you hearing from customers in the region around calling on workover rigs?

Miguel Rodriguez: We were very clear about these rigs coming down during our last earnings call, where we mentioned that SANAD has elected, rightly so, not to extend these workover contracts due to pricing considerations, and they were very marginal in terms of EBITDA and free cash flow contributions to the venture. So you are correct—these rigs came down, and we announced this during our last earnings call. We need to remain focused on the trajectory of our additions in international, Saudi included. The number of rigs that we added in Q1 outperformed our expectations, primarily by the late addition in Mexico, with Saudi remaining on plan even with all the headwinds—adding the fifteenth newbuild as well as one of the suspended rigs coming back to work. In Q2, we expect to remain on track in Saudi and elsewhere. Our outlook of reaching 101 rigs at the end of the year remains unchanged. In Q2, to be very clear, we are going to exit at 95 rigs.

Scott Gruber: Got it. I realize these workover rigs have always kind of contributed minimally. But given the backdrop, is Saudi coming back to try to contract those rigs again, or are other customers calling?

Miguel Rodriguez: The SANAD team remains poised to put these rigs back to work at the earliest opportunity. But as Tony mentioned, there are still a number of suspended rigs. We do not know how many of those are going to come back to work. If my memory serves me well, it is about 46 rigs that still need to come back to work. There are probably opportunities for these workover jobs, but if I am at Aramco, I would give priority to gas drilling or oil drilling, as opposed to workover. The team is working on putting these back to work. They are not in our 101 exit by the end of the year.

Tony Petrello: I do not know if you are referring to a separate class of rigs called workover rigs that are not drilling rigs. The class we are talking about involves a drilling rig doing certain workover jobs, which is different. There is another class of rigs—workover rigs—which we are not in; SANAD is not in that business. That separate business depends on Aramco’s plans in terms of activating production. In a market where they need to accelerate production, you could see some extra workovers in that class. But that is a whole different class of rigs.

Scott Gruber: Got it. I appreciate the color. Thank you.

Operator: The next question comes from Keith MacKey with RBC. Please go ahead.

Keith MacKey: Hi, thanks and good morning. Maybe just to start out on free cash flow. Miguel, you mentioned you would be in a good position to exceed your free cash flow guidance for the year. Can you run us through some of the factors there? I know you have maintained your capital guidance, but at the same time there are some incremental rigs in the US and maybe a bit of upgrade capital and reactivation capital that you might not have expected initially. Can you take us through some of the big pieces of free cash flow and, to the extent you are comfortable, where you think the year might land given how things have unfolded so far?

Miguel Rodriguez: Sure, Keith. I will not tell you where we are going to land. What I can tell you very clearly is that with the improved outlook in the Lower 48, our constructive view around international and the number of opportunities we continue to see even outside of the Middle East—even considering the headwinds around the conflict persisting—combined with very strong capital and pricing discipline, Tony and I firmly believe that we are going to outperform our earlier guidance around adjusted free cash flow. Where is that going to come from? Primarily incremental EBITDA, as a result of the improved activity outlook and remaining firm around international performance. We are maintaining, as you rightly mentioned, our CapEx range, which by itself is a testament to our discipline around where we deploy the money and what our thresholds are.

We continue to make strong progress on working capital in general. Q1 is good evidence of this. These are the key building blocks I can give you. I am sure you will run your models and arrive at something that will likely make sense. We remain robust and optimistic about the outlook in the US, the strength of our international franchise, and our ability to continue to manage and be disciplined around pricing, working capital, and CapEx.

Tony Petrello: As your question anticipates, there is a clear focus on optimizing incremental capital expenditures. As the year has gone by, that has been an increasing priority, particularly with aspirations of some of these new contracts. Extracting more from what we have today is a high priority, and hopefully that translates into the numbers you are hearing about. That is also one of the dynamics at work here.

Keith MacKey: Got it, and I appreciate the comments. Just turning to the Middle East, it is impressive you are able to maintain the same operational tempo given everything that has gone on there, and the broader international outlook still gets to 101 rigs by the end of the year. Can you talk about what you are seeing on the ground in the Middle East, how you are able to maintain drilling operations with minimal disruptions, and given persistent production shut-ins, do you think customers will continue to be able to drill for the foreseeable future? Or will there have to be some slowdown in drilling programs at some point?

Tony Petrello: Let me give you some color on what we have been navigating operationally. It has been a huge logistics strain. On the travel side, you have crew rotation issues. There are fewer airlines, for example, in Saudi. Turkish Airlines, Saudia, and FlyDubai are operating, and Emirates is just now resuming. No European airlines serve Saudi. All that puts strain on the situation. On the supply side, we had a need for drill pipe; we had drill pipe in Jebel Ali but could not get it out. That meant internally we had to use spare equipment from operating rigs to fill gaps, which drives a lot of activity to optimally allocate everything we have. On top of that, with the vast majority of our imports coming through the port of Dammam on the Gulf side in the Eastern Province, that has been an issue.

We are shipping from the Red Sea and trucking 850 miles, just to give you an idea. That adds time and extra expense. All these things are navigable. One thing I would like to comment on is our people in the region have been incredibly supportive of continuing operations. Our major customer Saudi Aramco in particular is totally supportive. Any concerns about safety, they respond. Despite the conflict and rockets flying in the region, our crews are focused on doing the job every day and are committed to it. That is a great sign of commitment. In general, together with a stronger Lower 48 with improving pricing and continued balance sheet improvement through 2026 to 2027, we are constructive on international despite headwinds, and we see growth in the Middle East and outside the region in Latin America.

We think our capital discipline puts us in a great position to outperform and meet the free cash flow guidance Miguel mentioned. That is the whole package.

Keith MacKey: Got it. Thanks very much.

Operator: That is all the time we have for questions today. I would like to turn the conference call back over to William Conroy for closing remarks. Please go ahead.

William Conroy: Thank you very much, everyone, for joining us. If you have any questions or care to follow up, please reach out to us. And thank you, Ashia, for hosting the call this morning.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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