Nabors Industries Ltd. (NBR) Q4 2010 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, thank you for standing by. Welcome to Nabors Investors Ltd. Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference over to Mr. Dennis Smith, Director of Corporate Development. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. As usual, we'll have our call here with about 20 to 30 minutes remarks by Gene, followed by a question-and-answer and wind up in one hour. Besides Gene and myself today is Tony Petrello, our President and Chief Operating Officer; Laura Doerre, our General Counsel; Clark Wood, our Chief Accounting Officer; and most of the heads of our principal business units. I just want to remind you that what we're going to be talking about obviously is the outlook for the business and as such, these constitute forward-looking statements under SEC rules and are subject to uncertainty and change. And we encourage you to look at our various filings. And with that, I'll hand it to Gene to get started.

Thanks again, welcome to the fourth quarter conference call. Again, I want to thank everybody for joining and as usual, we have posted to the Nabors website a series of slides that contain details about the performance of the various units or segments of the company. Please refer to these as we speak. The fourth quarter was a significant beat, with earnings per share increasing, this is sort of non-GAAP from $0.29 to $0.44, an increase of approximately 20% over the first call consensus of $0.37. Our most important metric which we always emphasize is operating income, which rose to $222 million from $164 million in the prior quarter, and this also was substantially above consensus. This was due to the strong performance from our North American land operations, better-than-expected performance from our International unit and a full quarter's contribution from our Superior Well Services business unit. The quarter's results for '10 is a significant improvement in 2011. Despite of not only relative, but absolutely anemic gas price, a protractive period of recovery in our International markets, which we obviously will discuss more later, and continued delays in the resumption of normalized activity in the Gulf of Mexico. Financially, we remain in pretty good shape, as we've previously brought back half of the $2.75 billion convertible debt which is due May 15 of this year. We have adequate liquidity to pay off the remaining $1.4 million while still funding a pretty ambitious capital expenditure requirement. And to do this, we used our current and anticipated cash flow on hand, proceeds from the sale of our Colombian E&P properties, mostly oil, as well as the temporary draw on our revolving line of credit. Our safety record remains one of the best in the industry and we continue to emphasize this along with our program to achieve a zero incidence rate, which we continue to strive for make our goal. Looking ahead to 2011, we're optimistic in factors that there are numbers that are in fact, tracking ahead of the book current consensus. And while there is obviously downside to this projection, the medium is projection. I personally believe there is a lot more potential in sizable upside possibilities. Let me first turn to Superior Well Servicing, this is the largest driver of our performance in the fourth quarter. In its first full quarter with Nabors, the units posted approximately $55 million in operating income, despite a seasonally low December. Demand in average pricing in this unit continue to improve and we are, therefore, in light of the pricing returns, we're converting a significant of amount capital to the expansion of our company capacity and to enter into the coiled tubing business, which is pretty ancillary to our existing businesses. When we first acquired Superior, they were operating 12 large spreads. They now are operating 14, and we expect to hit 23 or 24 by the end of the year. Needless to say, we are quite pleased with the contribution this unit has made in such a short time and we believe initially those incremental capital investments will continue to produce outstanding returns. We expect to receive the first increment of increase in petrol pumping spreads in March and increase thereafter approximately one per month. We also have a number of coiled tubing units on order and we'll start receiving those in May or June at the rate of at least about one month for the first six months, and perhaps thereafter. There has been a logical shift in both rigs and Pressure Pumping so this is delayed from our conventional dry gas areas and towards the oil- and liquids-rich plays, as well as to the premium market which is the Marcellus shale. As a result of this, we expect this unit to continually improve in 2011, even as the industry has substantial tracking capacity. Sooner or later, we accept that there will be a better or a rebalancing of supply and demand in this market. In the meantime, two things: We are doing our best to lock up term contracts so that we can sort of mitigate the potential effects of a balancing of supply and demand; and I think the other thing I should mention is, the quality of our crews and their performance and the relative -- the absolute quality of our equipment in terms of the average age is probably a year and a half and it's the right size, its current size is the ideal size. Anyway, let me switch to Nabors Drilling. Operating income in the U.S. operation increased substantially during the quarter, rising to $85,000 compared to $70,000 in the prior quarter. The recount was flat sequentially, but average margins increased by $800 a day. I think the most important thing about this unit is there's a continued demand for new builds, i.e. fit-for-purpose rigs, specifically for various shales, op works and sites [ph] our customers. Last year, we had 29 new builds, including two that may have crossed into January of this year. That includes 26 AC rigs and three major upgrades of SCR rigs, which will economically be equivalent of the new build AC rigs. I think, let me tell you how this evolved from our viewpoint, the new builds approach. We had sort of spec-ed or agreed to approve an AFE for seven new build rigs for the Lower 48. And we had two in construction against prospective demand in Canada. And before we actually got the AFE approved, one of the U.S. rigs was contracted and the U.S. entity contracted one of the two Canadian rigs. And I think there's a super-high probability that we'll have two more of these locked up in the next week or two, and I'm confident that we'll have many more. And what we'll tend to do, our confidence is, relatively speaking, high enough so that we'll continue to keep a backlog until the environment changes, about seven rigs under construction against the contracts we fully expect to get. And I don't expect that number to decrease anytime in the near future. We continue to move, I think, fully with or perhaps even ahead of the trends by moving rigs from the pure dry gas areas to the liquids-rich areas and measure that as that 85% in 2006, 85% in the U.S.A.'s income was from dry gas units. While this year, we expect it to be 68% to be derived from oil and [indiscernible]. Where this has gone, the 85-15 is probably going to be reversed in the next year or so. Anyway, we're right at the crest of that movement. Nabors Well-Servicing, this unit posted a significant increase in operating income during the quarter, $9 million to $12 million. The results primarily are attributable to an increase in hourly rates and strong trucking activity. This unit probably will comfortably more than double its operating income this year versus last. Among the factors involved are; during the quarter we created the acquisition of Energy Contractors [ph], a well-respected, well-servicing fluid family, rig-moving and construction company in the Appalachian basin. This should add significantly to our penetration of the Marcellus shale and this is really the home ground of our Superior well-servicing operation. We intend to augment this business, this Well-Servicing business, with surplus equipment which we're not using at some previously extended operations in Canada and North Dakota, so that should enhance our operations. We also have pretty significant synergies, potential synergies this unit down in Sweezey. We're spending a bunch of money, probably around $75 million, in additional crew handling, frac tanks, trucks, trailers, which will be facilitated by the synergies with Superior. And as I told this morning we did, how many? 40 tanks? Those are two-year contracts? 100 tanks? So it's even possible that these things will be locked up for a two-year contract at decent rates and these things obviously have -- real depreciation is pretty low. I think it's also worth to add [ph] that we have a very profitable operation with a large market position in Canada and we're taking advantage of that by adding a significant number of 400-plus power Millennium Rigs so that the outfit which we expect to show a good payout. Anyway, we also expect to have further price improvement in this area. The fact that the oil price is pretty good, is not an insignificant factor. And the Fluids Management business is booming everywhere, especially for us, we're gaining synergies so we have inter-business units. Nabors International. Our international operations did pretty well in this quarter, $72 million. It's a [indiscernible] from $64 million in the previous quarter. And this was a substantial reduction in downtime and fewer startup delays than anticipated, and this is across multiple rigs. Of lesser significance was the temporary extension of current rigs at current rates, particularly Jackups, which were originally scheduled to renew early. However, while we expect the overall 2011 results to approach those of 2010, the facts are that we're going to have approximately a $90 million reduction in operating income between the first and second quarters, which will result from scheduled dry docking for regulatory upgrades for probably four Jackups and a re-pricing of three of those Jackups to -- they're going to be employed but the current market for Jackups, as you all know, is a bunch lower than when these rigs were signed. And also, we're going to have downtime for six rigs in Saudi which are being converted from oil to gas. These will good longer-term contracts but the upfront price we'll pay in the second quarter. So the flat forecast in the face of this $90 million hit implies that the business is improving fairly dramatically and should continue to do so after early 2011. I mean, specifically we expect the fourth quarter to exit -- the fourth quarter number will be higher in 2011 than 2010. And longer-term, the fact is, that we are probably among the best, certainly the best-positioned land driller and a lot of the international drilling is land to take advantage of the inevitable increase in CapEx associated with a strong demand for crude relative to the longer-term availability of crude. So sooner or later, and probably demonstrably by the end of last year, the potential of this unit compared to the hickies we've been having in the last couple of years, I think will be manifested. Nabors Offshore, this unit is, or continued to be dramatically adversely impacted by the spill and its consequent results. We lost $5 million in the quarter, which was a little bit more than we expected. And the bottom line is that we probably lost $40 million in operating income compared to what it would have been without the spill. And this year, we'll probably lose $20 million of that anyway. Eventually, either the year after, or maybe at the rate sometime next year, we'll make up the $40 million. In addition to that, I think we've been talking in the last couple of quarters about front-end planning and designing and all that stuff we've had for two big major rigs. Now they've converted into contracts. One of the rigs we will sell. So we're talking on the sale and then it will operate for a long period, five or seven years. That's pretty decent operating. The other one we'll own and operate and that'll -- those two things will enhance our longer-term profitability in this unit. Canada. Results in Canada represents a significant increase, $17 million compared to $1 million in the fourth quarter. These results track the ramp up in its traditional ramp up in winter exploration. We should peak in what promises to be a very good first quarter as well. Activity in this market is pretty similar to what's going on in the U.S., where there's a shift from the dry gas in British Colombia to the more oil-, liquid-rich shales east of that. Here again, we have three rigs under construction in drilling, we probably have a couple of rigs under construction, two or three smaller capital rigs in swift over [ph] and the drilling are against full pay at CapEx. And these rigs are probably going to have an opportunity to be contracted for 360 days here, a full year or calendar year, compared to the typical Canadian year. Nabors Alaska Drilling, you've heard this story before, we've come down pretty dramatically. We're going to be -- 2010 was down pretty good from last year and 2011 is going to be down probably 60% from 2010. So we're still doing pretty well there, and let me tell you the reasons for this. We have the best units on the slope in our coiled tubing units and the first on our facility is only probably still the only operating AC rig out there. As you know, we told you in the past, we've lost it to Acura [ph] and while I wish everybody bluffed, their rigs are going way over capital and they're late. And anyway, we have an opportunity which we haven't talked about yet, so fill the gaps if there were issues there. But even more importantly, there is a ton of work to be done on the slope and for Tibias Oil [ph]. And even if you look at the medium this oil -- the stuff that's not the heavy type of stuff but a much more workable and marketable growth. So almost an infinite number of wells to be drilled. And I think the issue there is if the oil companies initiate the program by the tax hit, the state will react to their [indiscernible]. In the meantime, if the state comes to the oil companies and say, "We'd like to induce you to do some more drilling." That deal is going to, in effect, require a three-year standoff before it's resolved. But ultimately, it will be resolved. Also, biggest operator, BP, there's rumors that they're selling it and CapEx is uncertain, and all that stuff. That is going to be resolved in one way or another. So while Alaska -- we got the bad news here and we've had it for a while. But with bearings [ph] the next year, they won't kill us overall next year, the outlook is surprisingly favorable. Our other segments are doing pretty well. Not important, but doing well, including technology from our outfit [ph] and equipment sales which are doing well. Oil and Gas business, as you know, we're selling our Colombian assets and their oil. And what's happened de facto is that we had hoped to sell -- there are two entities, joint venture entity with First Reserved and 100% entity we hope to sell. And one contract for the joint venture and one contract with our own rent-on stuff. And it's going into sections, acres, individual gaps. And so what that means is, while I still think we'll get really the low end, which I said was approximately $400 million, I think it's going to be in blocs. It might even be multiple sales and it might be multiple closings. But I think we'll net-net get that by the end of the first quarter. By the end of the next quarter, excuse me. Our Canadian properties other than Columbia, includes our Canadian gas operations and our 50% interest in NFR. And these are essentially gas-related. And I think we've said before, say again, the crude price at end month was actually below four bucks when I came down here this morning. There's no chance of commercially realizing us either going public or NFR sale of gas, things probably [ph] for this year. But likely, we don't need to do it. We also had in our GAAP results, I point out another impairment in the carrying value of various gas-related holdings. And as you know, those things go down when gas goes down, i.e. the write-off goes up. And if gas prices go up, when they [indiscernible] if they get reversed or non-GAAP those out. And in summary, let me remind you that at the end of last quarter, I was pretty bullish and I said so, and I think that was justified by the fact that our stock price is up, I guess, approximately 50% since the timing of our last presentation. And I remain, I still remain very bullish, because I think there's a lot of value yet to be realized in our open units. And without being redundant, I base this on the increasing strength of our domestic operation with all of its components. And the fact that internationally, we're ideal-suited for the ultimate upturn in international demand, based on the fact that it's oil-based drilling and I think [ph] we are needed. I think that concludes my comments. Denny?

Operator, we're ready to start the question-and-answer session, please.

[Operator Instructions] And our first question comes from the line of Marshall Adkins with Raymond James. Marshall Adkins - Raymond James & Associates: Gene, I guess, in hindsight here, the Superior acquisition looks absolutely brilliant. So I want to spend just a minute getting a little more color on the state of pressure pumping market, specifically -- some of the other players in the pressure pumping market mentioned that Q4 was a little bit negatively impacted by weather and you're also expecting Q1 to be impacted by weather. Can you give us some quick commentary on just how much weather impacted you? How much expect that to fall through in Q1?

I think we did experience it. We expect a similar hickey in Q1. Dave, you want to elaborate on what that meant?

Yes, I think February, again as we're just seeing a lot of cold areas turning peg [ph]. You expect it in the Rockies, but you don't expect it [indiscernible] in Louisiana. So we had a lot of days where we've had downtime just due to ice and cold temperatures. Marshall Adkins - Raymond James & Associates: Well, what that then leads to -- I mean you still saw very nice improvements quarter-over-quarter in the margins of that business. Once we get past this weather, I'm talking in the Q2, Q3 of this year, should we look for further margin improvement in that business?

It's either going to be margin improvement or hopefully, term contracts. We're pushing both those things. At the moment, I think we prefer a multiple-year contract at today's prices, to another 3%. In fact, both those things are cooking. Marshall Adkins - Raymond James & Associates: How much of your fleet is under long-term contracts and how much would you like to be or do you think could be under long-term contracts, three or four months from now?

I'm going to not respond directly because I think that's competitively -- anyway, the point is we're doing okay on term contracts and we want to do a bunch better. I guess I'd be happy if we have, say, 2/3 of our service under term contracts at least two years. I'm not automatically happy with it. Marshall Adkins - Raymond James & Associates: Last question, you mentioned the fleets increasing, I believe, one a month, you mentioned. How much horsepower did you have at the end of Q4 and how much do you anticipate having a year from now, in December of '11?

Marshall, this is Dave. We were roughly 450, 475 at the end of fourth quarter. We did add some units during fourth quarter and again, based on the different basins that we're going to put these through, the horsepower per crew can range anywhere from 20,000 to 40,000-horsepower per crew.

We're adding at about 250, 300.

And our next question comes from the line of Arun Jayaram with Credit Suisse. Arun Jayaram - Crédit Suisse AG: Gene, I wanted to see if you can elaborate on what you're seeing in Canada. Obviously, the Chinese came in with a very large eye-popping deal with EnCana. Can you comment on some of the emerging new shale plays? What are the operator interest in PACE rigs and how much operating leverage do you see in Canada over the next 12 to 18 months?

There are two aspects of Canada from a Nabors viewpoint. One, we own a lot of gas acreage in British Colombia, almost all of it of value in the Horn River, and we obviously would like to sell that. We'd like to see if the Chinese, the Japanese, anybody could invest. Arun Jayaram - Crédit Suisse AG: You don't discriminate?

No, we'll take anybody, we'll even take Canadian dollars. Then from an operating viewpoint, we had had a dominant position in British Colombia but it's analogous to the Haynesville. They're moving not only from the Horn River but from the Southern prospects, which had been even more active. But it's mostly dry gas and it's pretty remote a prospect. And then moving to the oil-rich plays to the east of that. And we're participating [indiscernible] that we probably have at least three three-year contracts pending. And we're starting to build rigs against those prospects now. So Canada's going to be pretty good. Arun Jayaram - Crédit Suisse AG: Gene, the oil plays, what kind of rigs do those require?

So far the rigs we have, I don't think they need quite the horsepower that the Horn River rigs. But we have enough rigs to do it and we're building -- actually, I'm not 100% sure whether it's the existing shales or prospective shales, but we're building kind of slant rigs to this application, drilling slant rigs. Arun Jayaram - Crédit Suisse AG: And my second question and final question, Gene, on the International side, you cited three issues, pretty well-documented, but the three issues that will hurt operating income by $90 million. Can you help us frame what the first half of the year will look like and some of the positive offsets against that?

Yes, we're guessing the first half will be pretty bad in the first quarter, up 50% in the third quarter. Then by the fourth quarter, we'll probably double what we have in the first quarter in the first half. And this year, we ended with say it's at the $72 million, $73 million operating income and I think we'll do at least [indiscernible]. I hope at least say approximately 10% better next year and the first two quarters will be a fraction, maybe 40% of the fourth quarter. The second quarter will be a little more than half of the fourth quarter.

And our next question comes from a line of Dan Boyd with Goldman Sachs.

Everything you say sounds pretty good. It looks like you're investing a lot in the business. I think I'm a little taken back by the guidance number you gave out there for EPS and maybe we can walk through a couple of divisions in terms of what you earned this quarter, but what type of earnings power the investments are making. And maybe just starting with the U.S. Lower 48, we are doing over $80 million in operating income, but you're adding 26 rigs next year. So can you just talk about what--how you see that impacting your earnings power and the progression we should see throughout the year?

That's a good question. I think these new rigs are -- one or two things. One, they're starting up and getting to their design operating income a whole bunch quicker than used to be the case. And I think basically they're in the midst of high 20s on three-year deals and I think [ph]it's an operating cost of $112,000 a day, I guess. And they're all at least three-year deals. And so what's been happening is, well, the older rigs, the vintage rigs, at least the high-end rigs, the good SCR rigs and/or the AC rigs are rolling over at pretty good prices. So we're going to do better without. And it's mostly going to be in terms of incremental rigs, without too much in the way of incremental margin. It's going to be good, and I think, frankly, I think our domestic asset's [ph] sandbagging a little bit. But the outlook in terms -- I mean the most significant thing is, guys are coming to us today with new build, i.e. from their viewpoint, it's built-for-purpose rigs where they feel that if they get one or two wells drilled in a 12-year period, it pays for them to buy a rig which they designed to or they incorporate into our design to do the job they think is best. So if you -- the ultimate trick is, how many, say it goes without saying, but how many wells per year can you drill? And that implies ROP, implies rig moves, a whole bunch of things. And they're getting on to a manufacturing basis where they'd like to do this quicker. And the truth is that the new rigs, in fact, can do it and I don't see a real end to that besides. So if we did 29 last year, I don't know why we shouldn't do a significant number this year.

So it sounds like you guys are potentially sandbagging, as you put, in that they're not expecting incremental rig growth with these new builds. They're thinking more of a...

Some growth, not margin growth. I think the other thing is if you get another contract today, the rig's going to come in a year from now or so. And it's going to be a three-year deal starting then and frequently we have a deal that's still in. So it's not only good that you get the new builds, but you get them for three years from when they commit. So we're not only doing well for this year and next year, but we're locking in three years behind that.

And then how should we think about what Superior can do as you add this capacity? So you're looking to put some on contract. You just did $55 million operating income. You're doubling the amount of crews that you have. Clearly, you're not doubling all the horsepower though, but I suspect you might add more eventually. How are you thinking about the 4Q sort of year-over-year '11 versus '10 and what the opportunity is for them?

I think it's sandbagging a little bit, too. But it's pretty dramatic. I mean, we didn't have anything until essentially the fourth quarter. So for us, it's going to be a comparison growth to zero for essentially.

I'm sorry, I'm thinking 4Q '11 versus 4Q '10 where you have the full quarter, but now you're adding a bunch of that.

I would say more than 50% higher.

And then International's the one we've always struggled with forecasting because it's a little bit less transparent. Maybe you can help add some transparency to how you make that dramatic increase in the back half of the year. What portion of that is backed by contract? What portion of that is-- maybe require some of this new CapEx that you're adding? And just help us get more of the same level of comfort that you have with that 4Q number.

Dan. There's a number of -- there's about roughly 15 rigs that are deals that are starting up over the time-frame and it also kind of plays a little bit of higher activity in Mexico but obviously that can be a little variable. But we've already started. We've got I think four more rigs working in Mexico than when we hit the bottom last year. And so it's starting to come back, but that timing is always subject. But basically it's pretty visible rig startups, the price the Jackups will price at, I think our guys are modeling more optimistic but that's yet to be seen.

I think we're fairly optimistic in Iraq and the proof will be in the pudding. We're signing contracts as we speak. Part of the advantage we have is, we've got a number of these 500-horsepower PLC work-over rigs of which weren't exactly optimum for use in the U.S. and Canada. And we're successfully supporting them. I think we've got five or six already deployed to Iraq where basically, they're good prices, good returns and from our viewpoint, will be using a lot of some costing [ph]. So I would say the two big areas in Mexico, come back as they inevitably would and it's been inevitable that it haven't happened over the last few conference calls that would liken [ph] how quickly can we convert prospects in Iraq.

And our next question comes from the line of Kevin Simpson with Miller Tabak.

I just wanted to get back to International as well. So it sounds like Iraq exiting '11 and into '12 then could be a material contributor, material being, I don't know, $30 million to $50 million of the EBIT annualized. Is that reasonable?

I don't know what that number is frankly, Kevin, but I think it's going to significant. Ziggy [ph] has probably spent more time in Iraq than in Houston in the last six, eight months. And we have a pretty good deal with the Iraq drilling company and that's manifested in some contracts. Everybody has to deal from the cards as manifested in the contracts and we are optimistic. And also, I think I said that we have that extra bit of Nabors-type profitability when we deploy our Millennium 500 or some Millennium rig really from a stack status.

So something you don't have to put capital into. And in Mexico, have you gotten any positive feedback from PEMEX in terms of timing of when that--when rigs will go back to work there? And how much you're banking on Mexico to get the increase in 4Q '11?

Not that much. Just a couple of rigs. But they're very confident. They've got the plan to funding, but sometimes the capital is just not available from the government yet. But that's been true, frankly, for the last couple of quarters. I mean it's inevitable, they have to do it. They have the prospects they need for hydrocarbons and they have to switch the money from one place to another and it seems logical, it seems inevitable, but it's been slower rather than quick. And as you know, the two big hickies we've had internationally are the decline in Mexico counter-fold for not by prospects, not by needs, but by funding sources. Now the funding company, if it goes into one profit, has to get transferred to PEMEX's profit. And the other thing is, we anticipated a slowdown in Saudi, which by the way, prospects are improving there with gas rigs right now. But Iraq has been slower than we expected and we expected the transition between Saudi and Iraq to be quicker and it's been slower. So those account for the monster percentage of the drop internationally.

And then I just wanted to flip to properties. With the Superior deal, there was a kind of a, whatever the right word, commitment, I guess, to some degree of that one of the sources of funds consistently is going to be sale of properties. So since then it sounds like Colombia a little light relative to what you expected, maybe a little longer. I just wanted to make sure. Are you saying it'll take until the middle of the year to complete everything there?

My guess right now is, that there are two sales, we're going to have multiple blocks that are on-site, more than two buyers. And there might even, probably will be, multiple closings. And I think we'll still get the 400ish that'll be during the second quarter, not one fell swoop earlier.

And I guess is there still a commitment on the part -- are you still committed to using this as a source of funds over time and if conditions get a little better next year, that you'd be back putting these on the market? Or are you reconsidering?

They are on the market now and I think we'll sell them there. And also there's no shortage of funds. I mean, we're going to pay out $1.4 billion May 15. We have cash. We have a revolver right now of $750 million. Even before the issue of not an immediate there [ph] in Colombia occurred, we were contemplating and initiated a program to essentially double our revolver. Not that I compared myself with Nabors with him but whether as 1.75 or higher revolver. Ours is 0.715 and right now the incremental revolver, they don't count as hickies with the rating agencies. And incremental borrowings under our currently unused line is LIBOR plus 150. So we can borrow into [indiscernible] of 102%. To make a long story short, I don't see a financing issue even if we don't sell this stuff by May 15.

And so but just going further out, my thought was, that the properties were going to be a--has been a use of funds for a long time and was finally going to be a consistent source of funds and so it doesn't look like that's going to be the case in '11 over and above whatever you get out of Colombia.

Frankly, I think that's right. I think if we have good ramps on investment prospects, until you do, we have investments that are starting to reposition in Alaska. We have California or seam-assisted things. We're pretty close to having more come out than it is [indiscernible]. We might have investments in the E&P this year. Specifically, NFR is significant and pretty tight position because the platform one rig. The rest of it is potentially in very dry gas so they only have two rigs working. One in the Haynesville, the other is the shallow stuff that has liquid content. But even then, we said, if you can have the fuses there, which is pretty largely for gas, if you consider a 20%, 25% return, we'll buy the assets now. So I don't see a capital as much. I mean we could do $1 billion tomorrow, if we wanted to. We don't particularly want to do that. And the better way is to get the revolver up, which we're in the process of doing.

And our next question comes from the line of Jeff Tillery with Tudor, Pickering, Holt & Co. LLC. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: A question on weather impacting the other businesses outside Pressure Pumping, do you anticipate any sort of material impact to the Lower 48 drilling business this quarter?

Weather impact [indiscernible] most winters. Not the drilling business but a little bit of all sorts. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: And you mentioned robust CapEx plan for this year. Could you just give us more color on what exactly the numbers look like?

I think the total, it's probably around $1.3 billion, the big chunk is roughly $300 million. Joe, you have even more than that, I guess. Of that, domestic is probably as much as twice that. How much is your CapEx this year?

It's around $600 million.

So that's almost twice what Superior is and that's essentially 100% small percentage maintenance CapEx and 100% against the term contracts. Well-Servicing is pretty big. We have the acquisition -- was that this year or last year?

Last year.

Last year, okay. And this year, we still have more Millennium rigs. We have more water issues. Total of which is 150. And we'll have some elsewhere and some in E&P, actually. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: And my last question just on pricing in the Lower 48 land rig business, you guys have shown a fair amount of appreciation on some of the lower-end rigs, which are closing the GAAP growth of the AC rigs. How do you see the pricing dynamics playing out between the AC and higher-end SCR rigs relative to some of the lower-quality assets?

Well, we think, again, the AC rigs and the high-end SCR rigs will continue to improve somewhat. As Gene mentioned, we have a high number of our rigs are on term. So obviously, those have set to the year. But the ones that are off on the spot market, we're going to continue to improve those numbers. It puts them closer not to where Gene puts, which is they in turn [ph] but at least detailing [ph] viable to also look at going in the internal market. The legacy assets that we called in, we continue to improve those numbers, specifically all the legacy assets we have working up in North Dakota, so we have a very good market up there and reflects the value that marketing assets being in North Dakota. So again, it's the high end premium assets, the AC and SCR rigs though. However, away from the bulk in the North Dakota market, there's a pretty broad gap between the two numbers and you'll see it completely closed.

And the next question comes from the line of Judd Bailey with Jefferies & Co. Judson Bailey - Jefferies & Company, Inc.: I wanted to follow up on something you said or actually clarify. Gene, did you say that you hope to keep a queue of seven new builds in the Lower 48 at all times and did you say those were all behind the contract?

No, I would say that under current circumstances, we have -- I described how we started that. We committed a bunch of them before we even signed the AOD [ph]. But under current conditions, we'll keep the backlog accessible. If that's looks like it's too much, we'll reduce it. If it looks like it's not enough, we'll increase it. And the current outlook, which is pretty favorable, we got seven. And I'd say short term, I don't see that declining sector. Judson Bailey - Jefferies & Company, Inc.: And just to clarify, those are seven that don't have contracts?

Yes. Sometimes, the availability is relevant to getting a contract. Not always, but it's a factor. And this is true for every business unit. So we like to do things. And in fact, we do it against contract. If we have the prospects of say, three or four contracts, we'll commit to a smaller number of rigs against that prospect. In this case, does the year lag in delivery? So if their judgment is pretty good, then who knows? If they don't do it, they have the burden of higher capital cost where we'll return our capital, high depreciation. So not that they're well-motivated anyway, but the P&L was also a business unit factor. Judson Bailey - Jefferies & Company, Inc.: And then a follow-up on the Saudi Arabia rigs, the land rigs and also Jackups, just to clarify, do you have contracts in hand or you're finalizing negotiations? Can you just give us an update if those are actual contracts yet.

The gas rigs have been in hand and we've been constructing the components for a while and this is to stall them on the rigs. So each rig will be out of the market for about 60 days. While we do that, it's a new contract. The Jackups are yet to be determined, big timbers [ph] pending.

Couple of features that are -- anyway, just for details. But there's hidden cost that's even in Jackups [indiscernible].

And the last question comes from the line of Geoff Kieburtz with Weeden & Co. Geoff Kieburtz - Weeden & Co. Research: Probably a question for Dave, I guess. As we look at your expansion plan in the Pressure Pumping business, we've heard some stories about maybe some equipment delivery delays working into the system. We've also heard some folks talking about logistics difficulties in relation to profit [ph] and chemicals. Could you give us a little bit more background on how the operation is positioned in regards to both those issues?

We're probably seeing a 30-day delay in deliveries on equipment so far. We felt we could first group probably in February and now March looks like a good date. And going forward, we feel pretty good about the one a month after that. As far as profit [ph], we've expanded our committed profit [ph] for this year. Initially we're at roughly 400,000 tons. And now, we're up about 3x that, with additional capacity expected to be put in place as well. So we've been hearing the same things that you've been talking about and taking steps to really prepare ourselves to make sure we don't run behind, as far as meeting our expectations there.

Operator, we'll wind up our call today. If you want to close it out, please?

Ladies and gentlemen, that concludes today's Nabors Industries Ltd. Fourth Quarter 2010 Earnings Conference Call. Thank you for your participation. You may now disconnect.