Gene Isenberg, Nabors Chairman and Chief Executive Officer commented on the results, "I am relatively pleased with our first quarter performance considering the extent of contraction in activity and pricing we have experienced in our North American natural gas directed markets. Our Alaskan and international businesses all fared quite well in the first quarter, bolstering our consolidated results. In Alaska, results for both our drilling operation and Peak joint venture were seasonally strong with a high level of winter exploration activity partially offset by lower development drilling in the Prudhoe Bay area as a result of earlier announced drilling program curtailments by BP. Internationally, our offshore and land operations each showed large year to year improvements as a result of the late year 2001 deployments of a number of higher margin rigs on longer-term contracts.
Canada had a strong quarter although not as good as earlier expected due to the lower level of gas related drilling.
"The largest quarter-to-quarter variance came from our US lower 48 land drilling business as the number of working rigs and their average margins continued to slip. The rig activity in this unit has been relatively stable since the beginning of the year and is still at a level that approximates the first quarter's average. We do expect a further decline in our average margins during the second quarter, as they reach the current renewal margin, which has been stable for some time now. Our offshore, Gulf of Mexico and US land well servicing businesses also registered significant sequential declines in income, as weaker commodity prices resulted in lower levels of activity.
Our offshore transportation, manufacturing and logistics businesses all posted lower results along with the general decline in US land and Gulf of Mexico activity.
"The quarter brought several significant developments, the most notable of which were the announcements of our pending acquisition of Enserco Energy Services and the proposal to our shareholders to reincorporate in Bermuda. Both moves serve to increase our global position and enhance our international competitiveness. We also completed the acquisition of a third jackup in our international unit and a small software company within our EPOCH data acquisition and management business. We also made progress in our efforts to develop alliances with our larger customers.
"Going forward we expect to see further improvements in our international businesses with a number of further rig deployments particularly in the Middle East and continued strong bid prospects. Our US land well servicing unit expects to see some pickup in rig hours throughout the remainder of the year. In our US land, Gulf of Mexico and Canadian gas directed businesses we are increasingly confident of a significantly improved second half outlook. In the near-term however, we do expect further erosion in our results with lower average margins in US land drilling and continued weakness in the Gulf of Mexico. The near-term outlook in Canada has deteriorated with the seasonal spring thaw and a weaker than expected industry outlook in the near months. Our Alaskan business also expects to see a seasonal drop in the second quarter with the cessation of winter exploration activity and scaled back activity in existing field development programs.
"Our overall outlook both internationally and domestically continues to be quite bullish over the longer-term although the exact pace and timing of the pending recovery in North America still lacks total clarity."
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