Gene Isenberg, Nabors' Chairman and CEO, commented on the Company's results, "Income from virtually all of our operating units increased substantially over the prior year and prior quarter with the fourth quarter equaling our previous record quarter set in the third quarter of 2001. For the full year our U.S. Lower 48 Land Drilling group demonstrated the largest year-to-year increment followed by our Canadian, U.S.
Offshore, International, U.S. Land Well-servicing and oil and gas units. Only Alaska posted lower results in both periods with the aggregate results of our manufacturing and logistics businesses lower for the year but showing a good recovery in the fourth quarter.
"Compared to the third quarter of 2004, every unit posted improvement except for our U.S. Land Well-servicing business where strong pricing trends substantially offset seasonally weak activity arising from shorter daylight hours and the numerous holidays. The largest sequential improvement came from Canada where results set a new record for any fourth quarter on higher pricing and rig count. This performance was followed closely by our U.S. Lower 48 Drilling operation which continued a modest improvement in rig count propelled by a larger than expected improvement in margins as rig demand exceeded the readily available supply. Our International operations benefited from a broad based increase in activity with significant incremental contribution coming from numerous countries. Because four of the incremental ten new rigs for Saudi Arabia commenced late in the quarter any meaningful impact will not begin until the first quarter. Significant sequential improvement was also realized by our U.S. Gulf of Mexico offshore business with long-anticipated although modest increases in workover jack-up activity and pricing coupled with ongoing strength among our larger platform rigs. Our manufacturing and logistics businesses in aggregate posted a large sequential improvement over their third quarter loss, largely resulting from higher activity in our marine transportation operations following the hurricane. Oil and gas operations also posted a slight improvement in the fourth quarter.
"The outlook for our businesses is better than I have ever seen it in my 18 years with Nabors. We expect higher results in the first quarter from every one of our units led by our Canadian operations, as it enters its seasonally strongest quarter, with improved pricing and activity currently running at a rate of 70 rigs. Our U.S. Lower 48 Land Drilling unit should post the next largest increase with results driven by roll-thru of significantly higher pricing and a continued but more modest increase in rig count. The improved performance of our U.S. Offshore unit is expected to increase further in the subsequent quarters with substantially higher pricing and slightly higher utilization of the workover jack-ups appearing to be sustainable. Alaska should be a meaningful component of sequential improvement with the first quarter exploration season underway, although we still expect the full year to be modestly below 2004. Our International operations will continue to have significant sequential increases as the new rigs in Saudi Arabia commence and numerous other prospects materialize. The manufacturing and logistics companies are forecasting similar incremental results with more top drive shipments expected and generally healthier activity in all other components of this reporting operations.
"Nabors has seen a steady improvement in its market share over the last two years as we have been able to benefit disproportionately from the near doubling of rig activity in the Rocky Mountain Region and the increasing use of new bits and horizontal drilling technologies. We were able to reposition underutilized rigs at relatively low capital costs to take advantage of the strong Rocky Mountain Market while the investments we have made to facilitate meaningful reductions in average rig moving times and larger pump capacities have yielded competitive advantages and good returns with the increased emphasis on horizontal drilling. Similarly, our large asset base has allowed us to accomplish short delivery times with high specification rigs wherever needed (such as the ten we are furnishing to Saudi Aramco on an expedited schedule). Nabors' focus on and investments in quality and efficiency were recognized by Royal Dutch Shell in December when they selected Nabors Drilling USA's rig 784 as its "Land Rig of the Year." This rig operates for Shell on the Pinedale Anticline in Wyoming and was deemed the best among the 58 land rigs that operated for Shell worldwide in 2004. The evaluation factors were excellence in safety and environmental performance, operating efficiency, and joint engagement and teamwork.
"The results of our North American gas-driven markets are well in excess of our expectations and we see no reason to believe the fundamentals indicate anything but a continuation of this trend. Our conviction regarding the long-term more enduring nature of this cycle continues to be reinforced by not only the fundamental supply challenges of both North American natural gas and global crude oil, but also the feedback we receive from our customers regarding future activity plans and more importantly, the beneficial impact rig efficiency gains are having on their well cost."
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