Ladies and gentlemen, thank you for standing by, and welcome to the Nabors Industries Ltd. Third Quarter 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, October 23, 2013. I would now like to turn the call over to Dennis Smith, Director of Corporate Development. Go ahead, sir.

Thank you, Joan, and welcome, everybody, for our third quarter earnings conference call this morning. As usual, we'll have about a 30 minutes to 40 minutes of narrative by Tony on the state of the business, the quarter results, how we see the full year and how we think the near-term and longer-term stuff is shaping up. With Tony and myself today is also Laura Doerre, our General Counsel; Clark Wood, our Principal Accounting Officer; a number of other principals of our corporate staff and all the heads of our various operating units. As you -- there's also a set of slides that is posted to our website. You can access through the meeting site if you want to follow along with some that Tony might refer to as we go through the narrative. Also, I want to remind everybody, as that we're talking about the outlook, things are subject to change, and as such, they're forward-looking statements and as per the SEC rule, those things may change. So anyway with that, I will hand it over to Tony, please.

Good morning, everyone. Welcome to our conference call for the third quarter, and thank you for your participation. As Denny mentioned, we have posted the quarterly presentation slides, and I will refer to them by slide number during my remarks. Yesterday, we announced our results for the third quarter. In summary, the quarter came out roughly in line with our expectations at the time of our previous call. Our GAAP EPS was a loss of $0.30. However, that figure includes the $208 million premium we paid to refinance our high interest rate notes, $14 million of International equipment retirements, $20 million of coil tubing equipment impairments, and $34 million of early termination income related to contracted revenue we would have earned subsequent to the third quarter. Stripping out those items equates to normalized EPS of $0.20 at a 16% effective tax rate. I'd first like to discuss in more detail some comments from a high level. Our International segment performed very well and its results improved significantly. U.S. Drilling was roughly in line, and completion and production improved, although its results were tempered in a couple of specific areas. We also had several notable developments during the quarter that will contribute meaningfully to earnings beginning in 2014 that I would like to highlight before we go into the operating results. As noted in the press release and as you see on Slide 4, in the third quarter, Nabors was awarded 21 new build rig contracts with a total incremental capital commitment of approximately $800 million. These projects all meet our capital allocation metrics. 13 of these new build rig contracts are for International. You'll recall that last quarter, we said we believe the rig market was emerging from an extended trough. We believe these awards, in addition to 11 contract…

Operator, I think we're ready for the Q&A session, please.

[Operator Instructions] Our first question is from the line of Jim Wicklund with Crédit Suisse. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Tony, you gave us an awful lot to digest. And so having the first question is probably a liability on this one. Let me ask, of the 23 PACE-X rigs, which are fabulous rigs, 23 PACE-X rigs will go to work next year. Will they cannibalize your existing fleet? Will they displace existing Nabors rigs? Or will they be additive to the overall rig count for Nabors?

I think they will be additive. I mean, the market for those rigs generally compared to legacy rigs is a different market. So I don't see the type of market that those rigs would be, would be markets that typically we would take our legacy rigs. The only exception is, we have some legacy rigs that we have retrofitted with pad, with pad capability like our SCR-Plus rigs. And those are working in those markets. So with that, I don't think generally there's cannibalization of our existing stuff, which is one of the reasons why we're pursuing it. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Okay, that's positive. And everybody is building new rigs and everybody insists, it won't be their rigs that are cannibalized. So we're just trying to figure out if the overall rig count doesn't go up by as many as new rigs as we add next year, then obviously, somebody will lose, we're just trying to figure out who. The second question, I guess, is internationally, you talked about Saudi and its 43 rigs is impressive. Can you tell us where the markets aren't as good? Is Argentina good or bad these days? Where are the markets you kind of warned us about without mentioning countries?

Well, in terms of the markets, when you say not as good. I mean, I think international, in Argentina, in particular, I think we see that as a market which has turned and opened up. And as you know, we are sending additional rigs down there. In terms of markets that have challenges from the cost point of view. As you know, Iraq continues to be one of those challenges for us. Other markets where there's challenges include... Siggi?

Algeria, for example.

Yes, Algeria.

There's still various markets where we still don't see the uptrend, but it's in discussion and probably a time lag. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Understand. And how many rigs do you have in Iraq now?

At this moment, 6 rigs.

And our next question comes from the line of Waqar Syed with Goldman Sachs.

In terms of your PACE-X rig deployment in the U.S. land business and Lower 48, could you talk about the timing of deployment? How many rigs get deployed each quarter?

Sure. I think in the PACE-X, we actually have a pretty active fourth quarter. We're aiming to put 13 of those rigs into the market throughout the fourth quarter and 6 in the first quarter and then probably 2 thereafter. So it's -- we've been working hard to get these out into the market as quickly as possible, so those should hit on that kind of schedule.

Okay, that's great. And then in terms of your operating income from International business, you provided some color of some of the challenges. Could you quantify for us, like what kind of a detriment percentage-wise are we looking at into the fourth quarter and perhaps in the first half of next year?

Yes. I think, it's -- well, first of all, let me just give you some color here. In terms of the new rigs being deployed, there's basically 1 scheduled for the first quarter, about 6 -- 5 or 6 in the second quarter, the same about in the third quarter, and then 13 or so in the fourth quarter, and 1 of the additional ones into 2015. So it's going to be quite a ramp up. In terms of the incremental number, I think we've given you the dollar amount of the CapEx. And we've told you to meet [ph] our metrics, and I think you guys can back into some numbers. We're still in process, frankly, of having more discussions in both these -- in all the markets that we've talked about of additional contracts, and so we don't want to get into specific margins.

Okay. And then the 2 platform rigs that you're adding into Mexico, are those kind of the traditional Sundowner type or those are some of the bigger ones like you have for the Big Foot project?

Yes, the rigs, the 3,000-horsepower platform rigs, they're the big -- they're known as MASE rigs, which is Nabors' trademarked modular minimal area spacing self-elevating rig. And PEMEX has specifically spec-ed that kind of requirement for the their needs. And these are 2. And just, I think it's known in the marketplace. PEMEX is looking for quite a number of additional such platform rigs.

Okay. And your International -- other International land rigs that you're adding, do they primarily have camps with them or they are just -- you sending them just with the basic drilling unit?

No, they will camps with them. And I don't think you should underestimate the magnitude of the task here in terms of the ramp up in Saudi. I mean, these 11 rigs are going to require an enormous amount of equipment. And just the number of people, they need about 1,000 additional people just to staff these rigs. So it's a very substantial effort that's going to be undertaken.

And our next question is from the line of Robin Shoemaker with Citi.

So Tony, with the legacy contracts -- sorry, the term contracts expiration, you mentioned, I believe, 29 in the third quarter, 27 in the fourth quarter. That's a big chunk of your AC drive fleet, I assume those term contracts with the AC drive rigs, so I'm trying -- are those typically staying with the same operator? A lot of them go back to work, some on spot, some on term. Kind of -- I was just interested in some color around what happens typically in terms of movement between regions or between operators to keep these rigs employed as the term contracts expire?

Okay. I'll let Joe give you some color, but the term contracts apply not just to the AC rigs. There are some legacy rigs on term contract as well so. And as I mentioned, in this quarter, we have been able to roll over a bunch of expiring contracts to short term additional term contract. But Joe, maybe you had some more color.

Yes, no, it's a combination of both. I don't have the specific breakdown. But there is, at this point in time, as the operators see the efficiency gains out of these rigs, a lot of the operators want to maintain the asset they have. They don't want to lose the efficiency gain by picking something else up. So we're seeing the -- where the operator wants to re-term the contract or maintain the operation. It typically has stayed with the operator. Now we have redeployed some assets from areas that are a little less robust in activity, i.e. the northeast to the Niobrara. I mean, there's, I think, we moved 3 or 4 across that area and actually turn those contracts up. So there is -- it's a mixture and -- but I think we're still seeing the operator likes the rig, likes the crew, likes the efficiency and he's sticking with the contract.

Okay. So just on your overall then U.S. land rig margin, it ticked up in the third quarter, I think that's because of the revenue from the early termination. But prior to that, it was kind of in the $9,000 to $10,000 a day range. And with the renewal rates you're seeing, have we bottomed there, excluding early termination revenues or anything like that?

Yes, I think that...

You got 3 of us to answer that one.

Yes, that's a fair comment.

Robin, earlier, we had indicated we thought margins could drift as low as $9,000, $8,800 range, I think Tony pointed -- tried to point out in the call that this quarter's margin when you normalize it, it's about $9,300 and change. And that's about where we expect it to stabilize now.

Okay. For -- it would stabilize at that level incorporating the renewal pricing that you're getting today on AC drive and legacy rigs?

Yes. We think it's stable for a couple of quarters, then starts to progress. As more of the big rigs rollout, and we're actually seeing slight tick up in some of the spot market renewals and some of the contract renewals.

And our next question is from the line of Jim Crandell with Cowen.

Tony, are the day rates and terms of your new PACE-X contracts both in line with the previous contracts that you signed on the PACE-X rigs?

I mean, this is why I think, if they're both -- they're attractive terms and rates. And with respect to rate, in particular, I would say, they're not -- they're not too different from the rate that we've been historically enjoying, so.

So a little bit below is what you would say?

Correct.

Okay. And are those, generally, Tony, for the ones which you're winning, are they bid or negotiated?

Oh. Really, I would say, a majority are negotiated. We've had a high traffic through the -- through our Crosby yard through our -- both Rockwell, we're building these rigs. A lot of traffic with operators up in the Haynesville area, which I know some of the folks have -- from analyst community have seen. And then we're getting a pretty good demand. So it's not really being awarded through an effective tender quite honestly. It's a lot of negotiations involved.

Well, I've seen 5 of your PACE-X rigs now, Joe, so I think I might be in the lead in that category. In Canada, Tony, how quickly do you see the LNG market unfolding, both in terms of when you see the contract signed, I guess, to when you expect rig awards there? And do you -- are you expecting Nabors to be a major player there?

I think LNG, we're looking at 2018 I think, but you have to -- given that, that -- if that date kind of holds, I think people are going to start in 2015 or so really start to gear up, and so, and yes, we're interested, I think that kind of rig is definitely on the fairway for us. And as you know, we went into that region a long time ago, including in the E&P, in the E&P distraction as well. So yes, I think it's a market that's going to be there. And I think it will become more visible in about 1.5 years.

Okay. But I think there's been sort of 4 awards for Canadian LNG so far. And at least 1 of your Canadian players is talking about another 4 to 8 awarded this year. Are you looking at opportunities and do you see the things unfolding that quickly?

Yes. Jim, eventually, we're probably looking at a market that will approach 40 incremental rigs, we think, for those projects in aggregate. So this is kind of the early beginning to that, but we think '15 is where you'd see the big step.

Yes. I think per our prior conversations on this topic, we still are sensitive to our returns on capital. We want to make sure that the numbers all there make sense. With the short season, typically short season, it's been hard to get those kind of returns. And that's still something we have to focus on.

Okay. My last question, Tony. Given your emphasis on return on capital, are the International contracts you are signing, how does the -- given all the things, all the things you take into consideration there, are the returns on capital on your International contracts as good or better than the PACE-X rigs you're signing in the U.S.?

Better.

Better, even given sort of extra costs?

On the Saudi contracts, they should be better. The only thing I would say is, it's also better, but it comes at a price. And the price is the complexity and the herculean effort it's going to take. Just to give you some idea, if you take all these rigs together, it's probably, on a normalized basis, equal to about 53 PACE-X rigs we're talking about putting out there into the marketplace. So it's just giving you an idea of the dimension of what we're talking about. But yes, it would be better.

And is that in part, Tony, the fact that you're using a lot of equipment that's been on some of your SCR rigs?

Correct. As I signaled, I think we have about 8 SCR rigs in the U.S. that the foundations of which were transferring to International. And that as we've signaled to people before, we'll always use the SCR rigs as optionality benefit. And this is a prime example of that. And the benefit to the customer, of course, is the mass of substructures, which he can use are already in existence. And therefore, cuts the timeline time-to-market. And I think they saw value in that with us.

Jim, these are largely 3,000-horsepower and 2,000-horsepower which are weak demand in the U.S. market right now.

Our next question is from the line of Marshall Adkins with Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Two questions for the final question. International, it seems like we've been waiting a couple of years for this thing to turn. And this is the first real sense I have of a meaningful turn in that market, so it clearly looks like '14 is going to ramp up over the course of the year, particularly later. But it's hard for us analysts to kind of gauge the near-term issues. You had a lot of swirling issues short term that are going to affect margins and utilization. Can you give me a little more color just on the next couple of quarters on how we should think about margin trends and utilization trends there?

Here's the way, one way of thinking about it, Marshall. In the second quarter, I think our operating income for International was about $30 million.

$32 million.

$32 million. And in the third quarter, as we said, unexpectedly maybe, everything went right and you saw the power of what we have translated to the number there, which was a little early from what the scale is. So I think when we look at the fourth quarter, I think in terms of continuing a pace off of the $32 million number moving forward into the fourth quarter as a base, still increasing from that, but off that number as opposed to having already set a high watermark with the $50 million. And then the only caveat looking at that when you go into Q1 is that those major large income swinging items that I mentioned. It's basically the jackups. The jackups, they're going to go into a shipyard, and as you know, the rates are very high, therefore, those 1 or 2 rigs have a big meaningful impact. And that's where the Q1 number can be reduced somewhat or more significantly depending on how long it takes to get those things in the shipyard. So that's the way we think about it. But for that reason that's why I referred to this thing as transitory and not emblematic of the overall situation. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Right, all right, yes, I got that sense. So just be conservative in Q1. All right. So just summarizing everything I've heard, because you got a lot of moving parts here. International business, over the course of the year, let's call it just in '14 gets better. Completion business should get better over time, recognizing there are some contract rollover issues there. Production business, modestly better now that the large operators are back in. U.S. land flat, maybe slightly up as you go into the second half. I add all that up and '14 looks meaningfully better. What about Q4? I still have Q4 down in '13. Does that make sense?

Q4.

More flattish, Marshall, so maybe -- and part of it's the acquisition of the trucking company we did. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Okay. So I was just thinking all the early termination benefits you got this quarter go away, plus the daylight hour and all that kind of stuff, but...

Well, yes, a lot of those rigs are recommitted already.

And I will now turn it back to management for any closing remarks.

So we want to thank anybody for joining us today. And if you didn't get your questions answered and want to follow up, just feel free to give us a call. We'll be available the rest of today and through most of tomorrow. Thanks for participating.

Ladies and gentlemen, that does conclude your call for today. Thank you for your participation. You may now disconnect.