Ladies and gentlemen, thank you for standing by. Welcome to Nabors Industries Second Quarter 2013 Earnings Conference Call. [Operator Instructions] I’d like to remind everyone that this conference is being recorded today. And I would like to now turn the conference over to Mr. Dennis Smith, Director of Corporate Development. Please go ahead.

Good morning, everyone, and thank you for joining our second quarter earnings conference call this morning. We’ll follow our customary format where Tony Petrello, our Chairman and Chief Executive Officer, will give our perspective on the quarter’s results and some insight into how we see our business and the markets that we work in evolving in the future. In support of his remarks today, we have posted some slides to our website, which you can access to follow along if you desire. They’re accessible in 2 ways. If you are participating by webcast, they’re available as a download within the webcast. Alternatively, you can download them from our website at nabors.com under Investor Relations, then the submenu, Events Calendar, and you will find them listed as supporting materials under the conference call notice for this morning. In addition to Tony and myself today are Laura Doerre, our General Counsel; Clark Wood, our Principal Accounting Officer; Sri Valleru, our Chief Information Officer; and all the heads of our various business operations. Since much of our remarks today will concern our expectations of future, they are subject to numerous risk factors as elaborated on our 10-K and other filings. These comments constitute forward-looking statements within the meaning of the Securities Exchange Act of '33 and '34. Such that -- such forward-looking statements are subject to certain risk and uncertainties as disclosed by Nabors in its filing from time to time and we encourage you to read those filings for the risk factors involved. With that, we’ll get started and I’ll turn the call over to Tony.

Thanks, Denny. Good morning, everyone. Welcome to our second quarter conference call. I would like to thank everyone for participating this morning. As Denny said, we have posted to nabors.com a series of slides that contain details about our business, the performance of various segments and other relevant information. I will refer to some of these slides by slide number as we proceed. As you know, we pre-announced our earnings 2 weeks ago as we became aware that on the whole, we would underperform both the Street's and our own expectations. This underperformance was disappointing and was principally driven by the Canrig portion of our other rig services segment, and the U.S. pressure pumping portion of our completion services segment. The underlying causes were an abrupt decrease in third party capital equipment deliveries for Canrig, and historic weather conditions in the Bakken where we have a uniquely high concentration of our pressure pumping crews. We will talk in more detail about the circumstances later, but I first want to make sure that the underperformance of these 2 segments does not overshadow the several positive achievements we had in the quarter. On that note, I’d like to highlight some recent accomplishments and events before we go into the operating results. First, the topic of debt reduction. Through a combination of net operating cash flow, cash on hand from liquidated securities and a reduction of working capital, we were able to reduce gross debt by $302 million, and net debt by $219 million in the quarter. As shown on Slide 4, this brings our net debt to cap to 37%, leverage to 2.4x trailing 12-month EBITDA and interest coverage of 7x that amount. Based on consensus EBITDA estimates for the remainder of 2013 of $850 million, and CapEx of $691 million and…

[Operator Instructions] Your first question today comes from the line of Jim Crandell of Cowen.

Tony, could you give us an update on the asset sales? I realize asset sales can take a long time to accomplish. But even given that, it seems like this is sort of dragging on and on. Maybe you could – and if you could just put some kind of broad number range or timeframe range around the expected sales?

We have, as you know, the principal assets left are the E&P assets of the Eagle Ford, Alaska and Horn River. All 3 of those are with packages, with people and being looked at and marketed actively. And as I mentioned, I'm confident you'll see some progress on that very, very shortly. So then the other one that's being marketed is the Peak Logistics operation in Canada. And as well I think that you're going to see some – we are hopeful of seeing some results on that very shortly. So all 4 of those are in process and I think Alaska, oil properties in Alaska and the Horn River in Canada probably are the most challenging given the special circumstances in both markets. The number of players that are in – available in Alaska, participate in Alaska, it's as deep. And Horn River of course with the gas price the way it is, the trapped gas makes that more problematic. However, the recent developments up there with Apache and Chevron in that whole area I think people have now seen a path to LNG, and that makes the prospects very much more attractive. So we’re hoping that that will change the situation.

Okay. On that topic of LNG, Tony, there’s been some talk recently about there potentially being several newbuild announcements coming out of Canada here in the second half or startup of some delineation drilling in the Horn River beginning in 2014. Are you seeing that and what do you expect in terms of newbuild announcements in Canada?

Well, I think there are inquiries out there on newbuilds and we were – we are looking at them. And so I mentioned we are – we actually just deployed a bunch of assets there that are directed at that. And we understand, principally from the 2 people I just mentioned, there is some large amount of demand for the programs that are consummate up there. So I think that is the case. Question in Canada is the rate structure and the economics because as you all know, the drilling season up there is a short drilling season and the question is to make numbers work on a short drilling season for term contracts. But we are looking at it.

Okay. And last question I had, Tony, is could you talk a little bit about the future of your SCR rigs given the continued rig efficiencies and the move to increasingly the AC drive rigs? And maybe what has to have to happen or would there be any potential widening of the day rate spread between SCR and AC drive rigs in the marketplace?

That’s an interesting question. We have – our SCR-plus rigs which are SCR rigs with a Canrig special package that makes it look like an AC rig and perform like an AC rig, we’re enjoying 55% utilization on that category of rig. And the delta in day rates is maybe $1,000 a day or so. So it's not that wide. I think the SCR rates in terms of drilling with the – certainly with that Canrig package I think are effective alternatives where moving is not a big part of the equation. Obviously, the legacy rigs don’t have the advantage of the structural steel being designed to be fast-moving. So for those operators though that that’s not a driver, those rigs are attractive and in fact, that’s what we’re hoping to do in terms of marketing legacy rigs, spending more time marketing that. And we’re doing that in a bunch of regions like obviously the Bakken area and the Northeast and maybe even some of South Texas. So the other interesting thing is on the Saudi, the Saudi tender which everyone’s focusing on, that Saudi tender doesn’t specify AC rigs.

And international, in general.

And international in general doesn’t specify AC rigs. And so the fact – I mean it’s really remarkable actually that, I mean they view other things as more important to the drilling process in those plays, at least up until now. Whether that changes, I can’t say, but up until now, that's not part of the requirements. So therefore, as we’ve mentioned we uniquely have an installed base of a bunch of 2,000 and 3,000 horsepower SCR rigs which can be the platform for tendering to those markets. So and that’s what our focus is, to try to get utilization out of existing assets.

Our next question will come from the line of Mike Urban of Deutsche Bank.

Tony, from your comments on the prior question, it sounds like this is the case, but just wanted to confirm that the opportunities that you took advantage of in Argentina to move U.S. rigs out or – and potentially even some older rigs out of the U.S. into the international markets was not anomalous or one-off and again, just wanted to confirm that you do see additional opportunities to do things like that?

That’s correct. I mean, historically, a lot of in the early days back when international was growing and U.S. was at best sideways, we redeployed a lot of those rigs to the projects particularly in the Middle East. And so we have a well-oiled machine that can do that. And as I mentioned, I think the shrinking supply of rigs in the international market makes that a possibility. I think the question for us will be – it depends on the opportunity. If the rigs that are spec-ed have so much new stuff, where the amount of new content becomes so overwhelming and do you want to do that to a base rig that’s old that’s close to leaving that base rig and finding something that requires less CapEx to deploy into a market to be productive and spend all new money on a rig. So you have to do that kind of balancing in terms of looking at the issue. But in terms of the – out in the fairway, yes, those rigs are – those 2,000 SCR rigs right now, those massive substructures we have, they fit the Saudi spectrum example.

And it typically gives an advantage on delivery.

Yes. I don’t know if you can hear Siggi but as he said, it also gives us advantage on delivery with some of these international projects where times may matter.

What are the relative economics of that? It sounds like you can get the same type of rates on these substantially new rigs. As you said, most of it's new stuff. What’s the relative cost there? You have the time advantage, is there a cost advantage as well presumably from using that older rig?

Well, it’s obviously a cost advantage because the base rig you don’t have to spend in new dollars. But since that base rig, I mean when you look at the economics though, you should look at that as a mark-to-market items that you want to get some return on that as well. You just don't want to give that away. So but yes, there's the saving of the base rig and as we mentioned, there is a time advantage.

Right. And then last question was, you gave us a number of anecdotes on cost savings and efficiency improvements from the reorganization of the business you’ve been doing. Do you have anything in the aggregate that would tell us how much you think you’ve saved, how much – maybe how much margin improvement and better yet how much of that is still to come? It's just difficult for us to disaggregate with all the different moving pieces in the market.

Well, I think from the – I think as I mentioned in the U.S., I think we’ve taken out about $3 million to $4 million in the overhead in the U.S. operation and we’ve taken about $20 million of overhead in the pressure pumping well services operation. And as I’ve mentioned, that’s just the beginning as far as I’m concerned. We have bunch of initiatives underway to really look at the whole thing. So that’s the real priority. Given our scale, we think we should be able to operate as efficiently as anybody and that’s what we’re going to do. And you can see the change in our working capital with the DSO, for example, reflecting some of those things that are going on now. So that – so I don’t have an overall number yet to give people but that’s an active project right now.

And I mean would you say you are halfway through that, 3/4 or still in early stages?

I’d say we’re in early stage of the – what I just referred to.

Your next question will come from the line of Robin Shoemaker of Citi.

I wanted to just ask you if you could give us a little further commentary on your statement about E&P companies overspending their budgets here in the first half of the year and seeing a possible slowdown. Now, most of the year, most of the service companies drillers have kind of called for a flattish rig count through the end of the year. But clearly, last year, if we have a repeat of last year, then we’ll see a declining rig count in the fourth quarter. Would you – is that your expectation? And is there any steps you need to take to anticipate that so as not to see a further erosion in your margins?

Well, I think the first thing is, as I mentioned, I think that most companies that are over budget are attributing it to efficiencies. And with the exception of just a minor portion of our customers, most are planning rig reductions in the second half. So that – those are realities that we have to cope with. And the best way to cope with them is execute better and not be the one to get turned off of payroll. So…

Okay. So in a – as you indicated, you want to gain share in a flat-to-declining market. Is that – I mean, is price the real driver there for either the AC drive or conventional rigs?

Well, we’re in a business where price is always relevant. But I think people have to look at what – the delivered value of the well. And I think what I was saying with these – particularly with the legacy rigs for like SCR-plus rigs or even frankly some mechanical rigs we have, the ability for us to drill wells efficiently in certain regions given our long experience in those regions is really quite unique. In fact, I mean, there’s – one of the banks has an analysis of drilling efficiency by region where you see the 4 rigs in the Marcellus, the Bakken, Eagle Ford and one other one. But when you look at their analysis and particularly in the Bakken, and you see our drilling efficiency in terms of days to drill compared to our leading competitors, you'll that we’re the leading position. And based on the fourth quarter data that’s available and some – I use that just to say that the interesting thing is our fleet up there has a large chunk of legacy rigs that we’re still able to do that. So it’s not just the new rig that matters. It also is all the things you have behind it and I think that’s something we can sell.

And in this environment you see in the second half, do you think this AC drive spot rate that you mentioned is kind of 19 to 24, that that would hold in that range?

Well, I think we’ve been successful. As I said, rolling these over at $22,000 and I mean, at between $21,000 and $22,000, and the incremental ones we deploy was at $22,000 and change. And that’s where we think the market is right now.

Your next question will come from the line of Jason Gilbert of Goldman Sachs.

I was wondering maybe if you put a finer point on Lower 48, land rig supply and demand. You’d mentioned speculative new building by competitors in the press release. And I was wondering how many newbuilds you see out there, industry-wide? And then the follow-up is how much attrition do you expect from the U.S. land fleet over the next couple years?

Joe?

Yes, I don’t have a specific number of newbuilds coming into the market. We’ve – of course we can identify the rig count that we have. And as Tony's mentioned, we’re going to take advantage of the opportunities to redeploy assets, if the economics make more sense overseas. But again, the U.S. market is – the AC rig has done a phenomenal job and as he mentioned, some of our legacy assets also are very competitive in markets where you’re not – the driver is not specifically moving between pads or between wells. So again, the AC rigs are – again the efficiencies have spoken for themselves, so.

Yes, so more to your – to the core of your point there, I mean, I don’t think we have a good handle – no one has really good handle on what the actual attrition number is. And in terms of what’s in the pipeline, whether it was 50 or 70 new AC rigs out there, was the number that was floating around, I think the question is how many of those have been absorbed this quarter? I guess we’ll see when people start reporting.

When people report them.

And the other question is, as operators' plans change, how many current rigs that are on term contracts are going to come kick loose? So, but as far as I can see, given what we’ve experienced with Canrig, I don’t see a lot more new building coming on. So in terms of the increments from today, as far as I – I haven’t heard a lot more new building. I mean this one meeting the company talks about continue a cadence of maybe 2 rigs a month, but other than that, I don’t know of anything out there suggesting a lot of new building in this market.

Okay, that’s helpful. I wasn’t expecting it either but I did see the comment in the press release so I wanted ask. The other question I had is I like the fact that you paid down some debt in the quarter, I mean basically you’re implying your view is basically that equity holder and bond holder interests are aligned right now, and that reducing leverage will help the stock price. I was just wondering, what level of leverage do you think you would have to get to where that would stop being the case and you'd think about more directly returning cash to shareholders?

Well, I think we said, aspirationally and historically being in the mid-20s or high-20s, mid-to-high 20s would sort of get us to the level that we aspire to that historically we’re at, so that’s where we like to be. But you’re right, I think we view today there’s an alignment between reducing debt and the equity holders because frankly we trade on an enterprise value basis. And I think also that the premium we enjoy may in fact be a little bit correlated to the – inversely correlated to the debt level. And so hopefully, as the ratio goes down also, that ratio would improve on top of it. So that’s the thinking.

Your final question today will come from the line of Marshall Adkins of Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Being the last question, I’ll try to summarize what I thought I heard today and if you would just confirm whether I kind of got it right. U.S. land business flat troughing, probably not getting a whole lot better. International, gradually improving, should accelerate next year. Offshore, down a little bit, but not a needle-mover. Canada gets better seasonally. Production services gets better seasonally. Completion gets better with weather and Canrig can’t get any worse. So I add all that up and things should get meaningfully better next quarter. Is that fair?

Yes.

Depends on your definition of meaningfully…

The only other thing, Marshall, in your description of offshore, I do think, yes, there’s the seasonal stuff, but the underlying activity levels for the Super Sundowners, for example, in the drilling rigs there seems to have materially been up. So it’s not just coming out of that. I think there is some underlying more momentum there. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Right. So up year-over-year x the weather-related stuff, right?

Correct, correct. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Okay. So given all that up, the Street defines up meaningfully as $0.20 next quarter. Does that still sound reasonable to you all?

I guess.

Again, I think that's -- where we sit today, that sounds reasonable. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: That sounds like a wholehearted definitely maybe.

Yes, exactly.

Luke, I think we'll wind up the call now.