Commenting on these results, Gene Isenberg, Nabors' Chairman and Chief Executive Officer said, "This quarter's results represent another record for Nabors in all of our important financial metrics: operating income, cash flow, earnings per share and return on average capital employed. This puts us well on our way to handily exceeding our expectations for the balance of this year and beyond. Our operational metrics are equally good, with the most significant development being 104 three-year term commitments for new PACE(TM) rigs from quality customers. This exceeds our previously stated expectation of 100 by mid-2007. Most of these term deals actually average four years of assured work, taking into account the provision of an existing rig until the new rig arrives. This underwritten growth in our fleet not only serves to enhance future income and returns on capital, but also provides an unprecedented degree of visibility. It further speaks to our customer's acceptance of the capabilities of these rigs, as well as their confidence in the long-term nature of the current cycle. The opportunities for additional rigs continue to be abundant, with many small and large-scale projects under discussion both domestically and internationally.
On a sequential basis our operating results increased by 27% over the quarter ending December 31, 2005. The largest improvement once again came from our US Lower 48 drilling operations, followed closely by our Canadian and US Land well service units, while International increased modestly. All of our other operating segments posted large percentage improvements, ranging from 25 to 40%, on smaller but still meaningful numbers.
Our US Lower 48 Land drilling business benefited from a substantial increase in pricing, with a significant portion of the contracted fleet yet to reprice at current market rates. Leading edge margins continue to increase and currently exceed those achieved in the first quarter by approximately 50%, indicating the potential of this unit's forward profitability. Nineteen incremental new rig awards were received during the quarter, bringing total new rig commitments to 76, only three of which are reflected in the first quarter's results. We expect to average 13 rig years from these new rigs in 2006, with 35 new rigs in operation at the end of the year. The majority of the remaining 41 new rigs should commence operations during the first half of next year, which should result in another 50 rig years in 2007. In addition, we plan to refurbish eight rigs during 2006, five of which already have term commitments. Incremental contributions will also come from investments in existing rigs, including 43 top drives and automatic pipe handling equipment. We are also expanding our rig moving fleet by 50%.
In Canada, the first quarter set another quarterly record by a wide margin on the strength of new highs in rig utilization and pricing, as well as an extended winter drilling season. As a result, expectations for the full year have increased proportionately. Seven of the new rigs are destined for this unit, with four currently working and the balance to commence during 2006. In addition, delivery of the 20 new coiled tubing / stem drilling rigs is under way with the expectation of 12 in service by the end of the year.
Our US well servicing unit also posted a large improvement sequentially on the strength of an early-quarter price increase and slightly higher rig hours. We now have 12 of our new 500 HP Millennium workover rigs in service performing very satisfactorily. Customer acceptance of these new rigs has been very positive, as evidenced by the premium rate they are receiving. We expect to have over 45 of these rigs in service by the end of this year. We have also received the first of 20 new 200 HP truck-mounted service rigs ordered for the California shallow well market, with all units expected to be in service by year-end. This unit has multiple other income producing investments, the most significant of which is a relatively large expansion of its fluid hauling and disposal business.
Our US Offshore business improved steadily throughout the quarter as rigs returned to service following hurricane damage repairs. The full-year outlook is much greater than the first quarter implies as these rigs return to full utilization bolstered by extraordinarily large pricing improvements in all classes of rigs. The second half of this year will also reflect the contribution of three new rigs, which should deploy during the second half and will be additive to the 104 new rigs mentioned previously.
Our International operations improved modestly in line with our commentary last quarter as extended dry-dock time for some of our Arabian Gulf jackups continued to dampen this unit's results. The outlook for this unit over the balance of the year is exceptionally strong as a significant number of existing rigs are beginning to renew at much higher rates, and 25 incremental rigs are on schedule to commence operations throughout the year. This unit has 21 of the 104 new rig commitments with the contribution of approximately four of these rigs reflected in the first quarter's results.
Our Other operating segments, which consist primarily of our Sea Mar marine transport vessels and our technology and manufacturing businesses: Canrig, EPOCH and Ryan, also experienced higher volumes and pricing yielding a large increase in their quarterly results. The outlook for these businesses remains surprisingly favorable. Our oil and gas results reflected the property sale we mentioned last quarter. The overall results are essentially in line with our ongoing expectations for this entity as an adjustment to depletion expenses offset a substantial portion of the sale proceeds and we expect to do realize such sales in the future. SG&A increased significantly, as we found it necessary to align our cash compensation more closely with the market as a result of the dramatic reduction in equity based compensation we implemented in light of the new accounting rules.
We are very cognizant of the market concerns regarding short-term natural gas supply / demand and the magnitude of the expansion in capacity planned for the US land rig market over the next couple of years. Based upon our discussions with customers regarding their current and future plans, and even more importantly their willingness to commit capital to long-term projects and pay for upgraded and new rigs, we believe these concerns are overblown. Furthermore, recent and prospective developments across all of our operating entities suggest that our expectations for the future are in all likelihood conservative."
The Nabors companies own and operate approximately 600 land drilling and approximately 790 land workover and well-servicing rigs in North America. Offshore, Nabors operates 43 platform rigs, 20 jack-up units and three barge rigs in the United States and multiple international markets. Nabors markets 29 marine transportation and supply vessels, primarily in the U.S. Gulf of Mexico. In addition, Nabors manufactures top drives and drilling instrumentation systems and provides comprehensive oilfield hauling, engineering, civil construction, logistics and facilities maintenance, and project management services. Nabors participates in most of the significant oil, gas and geothermal markets in the world.
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